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CAFR FY2012 KODIAK ISLAND BOROUGH KODIAK, ALASKA KODIAK ISLAND BOROUGH COMPREHENSIVE ANNUAL FINANCIAL REPORT JULY 1, 2011 – JUNE 30, 2012 KODIAK ISLAND BOROUGH Comprehensive Annual Financial Report Year Ended June 30, 2012 Official Issuing Report Karleton G. Short Finance Director KODIAK ISLAND BOROUGH TABLE OF CONTENTS June 30, 2012 Page INTRODUCTORY SECTION: Letter of Transmittal 1-4 GFOA Certificate of Achievement 5 Organizational Chart 6 Elected Officials (Photographs) 7 Borough Officials 8 Map of Kodiak Island Borough 9 FINANCIAL SECTION: Independent Auditors’ Report 10-11 Management’s Discussion and Analysis 12-20 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets 21 Statement of Activities 22 Fund Financial Statements: Balance Sheet – Governmental Funds 23 Reconciliation of Net Assets Between the Government-Wide and the Fund Financial Statements 24 Statement of Revenues, Expenditures, and Changes in Fund Balances (Deficits) – Governmental Funds 25 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 26 Statement of Net Assets – Proprietary Funds – Business-Type Activities – Enterprise Funds 27 Statement of Revenues, Expenses, and Changes in Net Assets – Proprietary Funds – Business-Type Activities – Enterprise Funds 28 Statement of Cash Flows – Proprietary Funds – Business-Type Activities – Enterprise Funds 29-30 Notes to Basic Financial Statements 31-68 Required Supplementary Information: Budgetary Comparison Schedule – General Fund 69-70 Budgetary Comparison Schedule – Special Revenue Fund – Education Support 71 Budgetary Comparison Schedule – Special Revenue Fund – Facilities 72 Notes to Required Supplementary Information – Budgetary Comparison Schedules 73 Additional Supplementary Information: Budgetary Comparison Schedule – Debt Service Fund – Education and Health 74 Nonmajor Governmental Funds: Combining Balance Sheet 75 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 76 Nonmajor Special Revenue Funds: Combining Balance Sheet 77-80 KODIAK ISLAND BOROUGH TABLE OF CONTENTS, CONTINUED Page Additional Supplementary Information, continued Combining Statement of Revenues, Expenditures and Changes in Fund Balances (Deficits) 81-84 Schedule of Revenues, Expenditures, and Changes in Fund Balance (Deficit) – Budget and Actual: Fire and Road Service Areas: Fire: Fire Protection Area No. 1 85 Womens Bay Fire Department 86 Kodiak Airport Fire District 87 Road: Monashka Bay Road Service Area 88 Service Area No. 1 89 Womens Bay Road Service Area 90 Bay View Road Service Area 91 Service Area No. 2 92 Coastal Management 93 Child Care Assistance Program 94 L.E.P.C. 95 Land Sales 96 Buildings and Grounds 97 Woodland Acres Street Light Service Area 98 Trinity Islands Street Light Service Area 99 Tourism Development 100 Mission Lake Tide Gate 101 Fern Fuller Trust 102 Trinity Islands Paving 103 Nonmajor Capital Project Funds: Combining Balance Sheet 104 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 105 (continued) KODIAK ISLAND BOROUGH TABLE OF CONTENTS, CONTINUED Enterprise Funds: Schedule of Revenues, Expenses, and Changes in Net Assets – Budget and Actual: Municipal Solid Waste Collection and Disposal 106 Hospital Facilities 107 Kodiak Fisheries Research Center 108 911 Services Fund 109 Supplementary Schedules: Summary of Bonded Debt Service Requirements to Maturity 110 General Obligation Bonds, 2004 Series C – Retirement Schedule 111 General Obligation Bonds, 2004 Series D – Retirement Schedule 112 General Obligation Bonds, 2008 Series A – Retirement Schedule 113 General Obligation Bonds, 2009 Series A – Retirement Schedule 114 General Obligation Bonds, 2011 Series One – Retirement Schedule 115 General Obligation Bonds, 2012 Series A – Retirement Schedule 116 General Obligation Bonds, 2012 Series B – Retirement Schedule 117 STATISTICAL SECTION: Statistical Section Index 118 Net Assets by Component – Last Eight Fiscal Years 119 Changes in Net Assets – Last Eight Fiscal Years 120 Fund Balances of Governmental Funds – Last Three Fiscal Years 121 Changes in Fund Balances of Governmental Funds – Last Eight Fiscal Years 122 General Revenues by Source – Last Ten Fiscal Years 123 Assessed and Estimated Actual Value of Taxable Property – Last Ten Fiscal Years 124 Direct and Overlapping Property Tax Rates and Contributions to the School District 125 Property Tax Levies and Collections – Last Ten Fiscal Years 126 Principal Property Tax Payers – Current Year and Ten Years Ago 127 Ratios of Net General Bonded Debt Outstanding – Last Ten Fiscal Years 128 Computation of Direct and Overlapping Debt 129 Legal Debt Margin Information – Last Eight Fiscal Years 130 Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total General Governmental Expenditures and Transfers – Last Ten Fiscal Years 131 Ratios of Outstanding Debt by Type – Last Ten Fiscal Years 132 Demographic and Economic Statistics – Last Ten Fiscal Years 133 Average Monthly Employment & Earnings Last Seven Fiscal Years 134 Miscellaneous Statistical Data – Last Ten Fiscal Years 135 Property Value, Construction and Bank Deposits – Last Ten Fiscal Years 136 Full-Time Equivalent Borough Employees by Function/Program – Last Eight Fiscal Years 137 Operating Indicators by Function – Last Ten Fiscal Years 138 Capital Asset Statistics by Function/Program – Last Ten Fiscal Years 139 FINANCIAL SECTION Kodiak Island Borough Finance Department 710 Mill Bay Road Kodiak, Alaska 99615 Phone (907) 486-9323 Fax (907) 486-9392 January 28, 2013 Members of the Assembly Kodiak Island Borough, Alaska State of Alaska statutes and local charter provisions require that all general-purpose local governments publish a complete set of financial statements presented in conformity with generally accepted accounting principles in the United States of America (GAAP) and audited in accordance with auditing standards generally accepted in the United States of America by a firm of licensed certified public accountants. Pursuant to that requirement, we hereby issue the comprehensive annual financial report of the Kodiak Island Borough (Borough) for the fiscal year ended June 30, 2012. This report consists of management’s representations concerning the finances of the Borough. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the Borough has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the Borough’s financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the Borough’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The Borough’s financial statements have been audited by Altman, Rogers & Co., a firm of licensed certified public accountants. The goal of the independent audit was to form an opinion on whether the financial statements of the Borough, for the fiscal year ended June 30, 2012, are presented fairly, in all material respects, in accordance with generally accepted accounting principles in the United States of America. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor issued an unqualified opinion on the Borough’s financial statements for the fiscal year ended June 30, 2012. The independent auditors’ report is presented as the first component of the financial section of this report. The independent audit of the financial statements of the Borough was part of broader, State and federally mandated “Single Audits” designed to meet the special needs of State and federal 1 grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government’s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of State and federal awards. These reports are available in the Borough’s separately issued Single Audit Report. GAAP require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The Borough’s MD&A can be found immediately following the report of the independent auditors. Profile of the Government The Kodiak Island Borough lies at the western border of the Gulf of Alaska, approximately 40 miles south of the Kenai Peninsula. Kodiak Island is the largest island in Alaska and the second largest in the United States. About two-thirds of the Borough lies in the Kodiak archipelago with the remaining third on the Alaska Peninsula, across the Shelikof Strait from Kodiak Island. The Shelikof Strait is only 20 miles wide in places. The Borough encompasses 7,130 square miles, making it slightly smaller than the State of Massachusetts and serves a population of 14,401. The Borough was incorporated September 30, 1963, as a Second Class Borough by Chapter 146 Sessions, Laws of Alaska 1961, as amended. The powers granted to the Borough include area- wide powers and non area-wide powers. Area-wide powers are health, education, assessment and collection of taxes for both the Borough and cities within the Borough, planning and zoning, and general administrative services. Non area-wide powers include parks and recreation, economic development, solid waste disposal, and animal control. Service districts within the Kodiak Island Borough provide fire protection, road maintenance and construction, and street lighting. A Mayor/Manager form of government governs the Borough. The Mayor is elected at large while the Borough Assembly appoints the Manager. The Assembly is composed of seven members who are elected at-large. The Borough provides a full range of services including fire protection, the construction and maintenance of roads and other infrastructure, community and economic development, health and sanitation, culture and recreation and solid waste collection and disposal. The Borough also is financially accountable for a legally separate school district which is reported separately within the Borough’s financial statements. Additional information on this legally separate entity can be found in the basic financial statements. The annual budget serves as the foundation for the Borough’s financial planning and control. All departments of the Borough are required to submit requests for appropriation to the Borough Manager. The Borough Manager uses these requests as the starting point for developing a proposed budget. The Borough Manager then presents this proposed budget to the Assembly for review by April 30. The assembly is required to hold public hearings on the proposed budget and to adopt a final budget by no later than June 10. The appropriated budget is prepared by fund and department. The Assembly makes appropriation transfers between funds and/or departments only 2 after the adoption of an ordinance. Borough staff may execute transfers between line items within a department. Amendments to the budget can occur anytime during the fiscal year through the Borough Assembly or administrative action. Expenditures may not legally exceed appropriations at the following levels: Capital Project Funds – project level, all other funds – department level. All funds, except Capital Project Funds, are budgeted on an annual basis encompassing a fiscal year. Budgets of Capital Project Funds generally encompass the period from start-up to project completion, which is generally greater than one year. Budget-to-actual comparisons are provided in this report for each individual governmental and proprietary fund for which an appropriated annual budget has been adopted. For the General Fund, the Education Support Special Revenue Fund and the Facilities Special Revenue Fund, this comparison is presented on pages 69-72 as part of required supplementary information. For governmental funds, other than the General Fund, the Education Support Special Revenue Fund and the Facilities Special Revenue Fund, this comparison is presented in the additional supplementary information subsection of this report, which starts on page 74. Also included in the additional supplementary information subsection are the Education and Health Debt Service Fund budget to actual. For proprietary funds, this comparison is presented in the proprietary funds subsection of this report, which starts on page 106. Factors Affecting Financial Condition The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the Borough operates. Local economy. The economic condition of the Kodiak Island Borough remains healthy. The main industries of the Borough are commercial fishing, logging, and tourism. The commercial fishing industry in Kodiak has been very strong. Raw fish tax increased from $796,373 in FY2003 to $1,405,360 in FY2012, a 76% increase. Logging has remained fairly constant over the last ten years. The Borough collected $57,960 in severance taxes on timber in FY2003 and $74,876 in FY2012. Tourism continues to be strong in Kodiak. Bed tax revenues have increased from $30,412 in FY2003 to $87,400 in FY2012, an increase of 65%. Considering todays economy this is very good. To accommodate this demand, construction of fishing lodges, bed and breakfast accommodations and recreational facilities has increased along with an increase in charter boat and guide operations. Cruise ships continue to visit Kodiak. Relatively new to the Kodiak Island Borough is the aerospace industry, which began with construction of the Kodiak Launch Complex in 1998. Owned by the Alaska Aerospace Development Corporation (AADC), a public corporation of the State of Alaska, the Kodiak Launch complex is the first complete launch facility built in the United States since the 1960’s and the first not owned by the Federal Government. The state-of-the-art facility includes a launch control center, payload processing facility, spacecraft assembly building and launch pad. It is designed to handle small to medium sized rockets used to launch low earth orbit satellites, as well as military, scientific and research missions. Kodiak is home to the largest U.S. Coast Guard base in the country, employing nearly 1,350 people and providing vital services to the marine industries that are an integral part of Kodiak’s make-up as well as making a significant contribution to the Kodiak community. 3 The seafood industry is by far the largest industry in the Kodiak Island Borough. This industry includes commercial fishing, fisheries research, management and enforcement, seafood processing, and maintenance and support services. Kodiak is home to the largest port in the State, housing over 500 commercial vessels and consistently ranks among the top ten ports in the United States in terms of amount and value of product delivered. In 2010, the last year data was available, Kodiak was number three in the nation for number of pounds landed (325,000,000 pounds) and number three in the value of fish landed ($114,682,184). Employment varies throughout the year with July, August, and September being the peak months due to the increased activity in the fisheries and related businesses, then declines in November and December when fishing quotas are reached. The local unemployment rate has fluctuated from 6.2% to 9.6% over the last five years, but the overall average has remained around 7.4%. Long-term financial planning. Every year the Borough adopts a five-year strategic plan. In this plan the Borough decides what its goals and objectives are for the next five years. The Borough breaks these goals out based on our Mandatory and Adopted powers. To view the complete Strategic plan you can visit our web site at www.kodiakak.us. Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Borough for its comprehensive annual financial report (CAFR) for the fiscal year ended June 30, 2011. This was the twenty-third consecutive year that the Borough has received this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. The preparation of this report would not have been possible without the efficient and dedicated services of the entire staff of the administration and finance department. We would like to express our appreciation to all members of the department who assisted and contributed to the preparation of this report. Credit must be given to the mayor and the assembly for their unfailing support for maintaining the highest standards of professionalism in the management of the Borough‘s finances. Respectfully submitted, Charles E. Cassidy Jr. Karleton G. Short Borough Manager Director of Finance 4 6 Electorate Borough Manager Borough Attorney  Engineering/  Facilities Director  Fire Chief  Finance/MIS Director  Borough Mayor Borough Assembly Community Development Director Secretary III Maintenance  Worker KFRC Maintenance  Engineer KFRC Receptionist  Environmental Specialist  Baler/Landfill  Supervisor Baler Operator II Baler Operator II Baler Operator I Baler Operator I Baler Operator I Administrative Assistant Assessor Associate Planner LRP Associate Planner Enforcement Drafting Technician Secretary III Property Appraiser Appraiser Technician Assessment Clerk I General  Accountant  Accounting Tech Accounts Payable  Accounting Tech Payroll Revenue  Accountant Secretary III MIS Programmer/ Analyst  MIS Network Administrator Cashier Borough Clerk Assistant Clerk Deputy Clerk  Kodiak Island Borough Fiscal Year 2012   Project Manager/  Inspector Project Assistant PC Network Tech II GIS Analyist KODIAK ISLAND BOROUGH KODIAK, ALASKA BOROUGH OFFICIALS YEAR ENDED JUNE 30, 2012 MAYOR Jerome Selby ‘13 ASSEMBLY Carol Austerman ‘13 Tuck Bonney ‘14 Jerrol Friend ‘12 Dave Kaplan ‘14 Chris Lynch ‘12 Mel Stephens ‘14 Louise Stutes ‘13 MANAGEMENT Vacant ....................................................................................................................Borough Manager Karleton G. Short .................................................................................... Finance Director/Treasurer Woody Koning ............................................................................ Engineering and Facilities Director Nova Javier, CMC ....................................................................................................... Borough Clerk Bud Cassidy ................................................................................ Community Development Director Bill Roberts .......................................................................................................................... Assessor Robert A. Himes ................................................................................................................. Fire Chief Wohlforth, Brecht, Cartledge & Brooking ............................... Borough Attorney (Contracted Firm) Stuart McDonald ............................................................................... Superintendent, School District Dria Bray-Holloway ............................................................................................ General Accountant Dora Cross ......................................................................................................... Revenue Accountant Lauri Whiddon ................................................................................. HR Officer/Executive Assistant 8 9 INTRODUCTORY SECTION Independent Auditors’ Report The Honorable Mayor and Members of the Assembly Kodiak Island Borough Kodiak, Alaska We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the Kodiak Island Borough, Alaska, as of and for the year ended June 30, 2012, which collectively comprise the Borough’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Kodiak Island Borough, Alaska’s management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the Kodiak Island Borough, Alaska, as of June 30, 2012, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued a report dated January 28, 2013 on our consideration of the Kodiak Island Borough, Alaska’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 12 through 20 and the budgetary comparison information on pages 69 through 72 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be 10 The Honorable Mayor and Members of the Assembly Kodiak Island Borough essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s response to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Kodiak Island Borough, Alaska’s basic financial statements taken as a whole. The “Additional Supplementary Information” listed in the table of contents is presented for purposes of additional analysis, and is not a required part of the basic financial statements of the Kodiak Island Borough. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards general accepted in the United States of America. In our opinion, the accompanying “Additional Supplementary Information” listed in the table of contents is fairly stated in all material respects in relation to the basic financial statements as a whole. The introductory section and statistical section, as identified in the table of contents, have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. January 28, 2013 Anchorage , Alaska 11 KODIAK ISLAND BOROUGH Management’s Discussion and Analysis June 30, 2012 As management of the Kodiak Island Borough, we offer readers of these financial statements this narrative overview and analysis of the financial activities of the Kodiak Island Borough for the fiscal year ended June 30, 2012. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages 1 - 4 of this report. Financial Highlights • The assets of the Kodiak Island Borough exceeded its liabilities at the close of FY2012 by $170,051,323. Of this amount, $52,797,881 (unrestricted net assets) may be used to meet the Borough’s ongoing obligations to citizens and creditors. • In FY2012 the Borough’s total net assets increased by $4,993,501. • At the end of the current fiscal year, the Borough’s governmental funds reported combined fund balances of $55,170,765. This was a decrease of $3,130,275, compared to the net change in the prior year of an increase of $4,370,149. At the end of FY2012, unassigned fund balance for the general fund was $3,126,037. This was 59% of total general fund expenditures. • The Borough’s bonds payable decreased by $3,340,000. This was due to the issuance of a $11,615,000 refunding bond less payments of $14,955,000 in bond principal. Overview of the Financial Statements Government wide Financial Statements The government wide financial statements are designed to provide readers with a broad overview of the Kodiak Island Borough’s finances, in a manner similar to a private sector business. The statement of net assets presents information on all of the Kodiak Island Borough’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the Kodiak Island Borough is improving or deteriorating. The statement of activities presents information showing how the government’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. Both of the government wide financial statements distinguish functions of the Kodiak Island Borough that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the Kodiak Island Borough include general government, public safety, community and economic development, emergency preparedness, health and sanitation, education, culture and recreation, parks and recreation, service district maintenance and primary and secondary education. The business-type activities of the Kodiak Island Borough include a solid waste collection and disposal facility, a Borough owned hospital, the Kodiak Fisheries Research Center and a 911 emergency system. The government wide financial statements include not only the Kodiak Island Borough itself (known as the primary government), but also the legally separate school district for which the Kodiak Island Borough is financially accountable. Financial information for this component unit is reported separately from the financial information presented for the primary government itself. 12 KODIAK ISLAND BOROUGH Management’s Discussion and Analysis June 30, 2012 The government wide financial statements can be found on pages 21-22 of this report. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Kodiak Island Borough, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance related legal requirements. All of the funds of the Kodiak Island Borough can be divided into two categories: governmental funds and proprietary funds. Governmental Funds – Governmental funds are used to account for essentially the same functions reported as governmental activities in the government wide financial statements. However, unlike the government wide statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Kodiak Island Borough maintains 33 individual governmental funds. Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the General Fund, the Education Support Special Revenue Fund, the Facilities Special Revenue Fund, the Education and Health Debt Service Fund, the Renewal and Replacement Projects Capital Project Fund, and the Kodiak High School Renovation Capital Project Fund, which are all considered to be major funds. Data from the other nonmajor funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in the supplementary information section of this report. The Kodiak Island Borough adopts an annual appropriated budget for its General Fund, Special Revenue Funds and Debt Service Funds. Budgetary comparison statements have been provided for the funds to demonstrate compliance with this budget. The basic governmental financial statements can be found on pages 23-26 of this report. Proprietary Funds – The only Proprietary Fund type that the Kodiak Island Borough uses is enterprise funds. Enterprise funds are used to report the same functions presented as business type activities in the government wide financial statements. Proprietary Funds provide the same type of information as government wide financial statements, only in more detail. The Kodiak Island Borough uses enterprise funds to account for a solid waste collection and disposal facility, a Borough owned hospital leased to the Sisters of Providence d.b.a. Providence Kodiak Island Medical Center, rents and utilities of the Borough owned Kodiak Fisheries Research Center, and 911 phone charges and expenses. The Kodiak Island Borough adopts an annual appropriated budget for its proprietary funds. Budgetary comparison statements have been provided for the funds to demonstrate compliance with the budget. The basic Proprietary Fund financial statements can be found on pages 27-30 of this report. 13 KODIAK ISLAND BOROUGH Management’s Discussion and Analysis June 30, 2012 Notes to the Basic Financial Statements – The notes provide additional information that is essential to a full understanding of the data provided in the government wide and fund financial statements. The notes to the basic financial statements can be found on pages 31-68 of this report. Other Information – In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information including budgetary comparison schedules for the General Fund, the Education Support Special Revenue Fund and the Facilities Special Revenue Fund. Required supplementary information can be found on pages 69-72 of this report. Government wide Financial Analysis Statement of Net Assets As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position. In the case of the Kodiak Island Borough, assets exceeded liabilities by $170,051,323 at the close of FY2012, the most recent fiscal year. The net assets of the component unit were $3,256,082 at the close of FY2012. The largest portion of the Kodiak Island Borough’s net assets ($117,253,442 or 68%) reflects its investment in capital assets (e.g. land, buildings, equipment and infrastructure) net of related debt. The Kodiak Island Borough uses these capital assets to provide services to citizens; consequently, these capital assets are not available for future spending. Although the Borough’s investment in capital assets is reported net of debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Governmental Business-type Activities Activities Total 2012 2011 2012 2011 2012 2011 Current and other assets $56,194,809 59,020,428 16,390,910 12,857,544 72,585,719 71,877,972 Capital assets 111,845,843 105,968,795 39,316,194 37,905,921 151,162,037 143,874,716 Total assets $168,040,652 164,989,223 55,707,104 50,763,465 223,747,756 215,752,688 Long-term liabilities $30,976,989 35,179,420 12,746,194 7,868,121 43,723,183 43,047,541 Other liabilities 3,512,846 925,451 6,460,404 6,587,375 9,973,250 7,512,826 Total liabilities $34,489,835 36,104,871 19,206,598 14,455,496 53,696,433 50,560,367 Net assets: Invested in capital assets, net of related debt $85,285,497 81,789,375 31,967,945 35,170,143 117,253,442 116,959,518 Unrestricted 48,265,320 47,094,977 4,532,561 1,137,826 52,797,881 48,232,803 Total net assets $133,550,817 128,884,352 36,500,506 36,307,969 170,051,323 165,192,321 For more detailed information see the statement of net assets on page 21. The remaining balance of unrestricted net assets, $52,797,881, may be used to meet the Borough’s ongoing obligations to citizens and creditors. 14 KODIAK ISLAND BOROUGH Management’s Discussion and Analysis June 30, 2012 Statement of Activities The following condensed table of changes in net assets displays the revenues and expenses for the current and prior year. 2012 2011 2012 2011 2012 2011 Revenues: Program revenues: Charges for services $684,697 719,818 4,658,485 5,189,767 5,343,182 5,909,585 Operating grants and contributions 2,479,263 2,295,661 75,819 — 2,555,082 2,295,661 Capital grants 574,439 3,241,219 97,534 — 671,973 3,241,219 General revenues: Property taxes 13,327,552 11,945,103 — — 13,327,552 11,945,103 Grants and entitlements not restricted to specific programs 4,199,766 3,642,009 — — 4,199,766 3,642,009 Land sales 4,540 2,383 — — 4,540 2,383 Severance taxes 1,970,265 1,649,275 — — 1,970,265 1,649,275 Other 327,540 739,113 110,442 — 437,982 739,113 Investment earnings 1,788,903 713,414 282,027 100,925 2,070,930 814,339 Total revenues 25,356,965 24,947,995 5,224,307 5,290,692 30,581,272 30,238,687 Expenses: General government 4,281,383 5,109,232 — — 4,281,383 5,109,232 Public safety 622,396 664,349 — — 622,396 664,349 Community and economic development 1,195,237 1,211,189 — — 1,195,237 1,211,189 Emergency preparedness 21,423 11,705 — — 21,423 11,705 Health and sanitation department 391,996 392,011 — — 391,996 392,011 Education, culture and recreation 64,289 85,690 — — 64,289 85,690 Parks and recreation 5,825 13,625 — — 5,825 13,625 Service district maintenance 705,665 593,388 — — 705,665 593,388 Primary and secondary education 11,998,842 12,834,349 — — 11,998,842 12,834,349 Interest on long-term debt 1,188,945 1,508,052 — — 1,188,945 1,508,052 Municipal solid waste collection and disposal — — 2,345,752 2,192,132 2,345,752 2,192,132 Hospital facilities — — 1,016,882 1,027,615 1,016,882 1,027,615 Kodiak Fisheries Research Center — — 1,746,521 1,847,427 1,746,521 1,847,427 911 services — — 2,615 53,041 2,615 53,041 Total expenses 20,476,001 22,423,590 5,111,770 5,120,215 25,587,771 27,543,805 Change in net assets before before transfers 4,880,964 2,524,405 112,537 170,477 4,993,501 2,694,882 Transfers (80,000) (80,000) 80,000 80,000 — — Change in net assets 4,800,964 2,444,405 192,537 250,477 4,993,501 2,694,882 Net assets, beginning of year, as previously stated 128,884,352 126,439,947 36,307,969 36,057,492 165,192,321 162,497,439 Prior period adjustment (134,499) — — — (134,499) — Net assets, beginning of year, as restated 128,749,853 126,439,947 36,307,969 36,057,492 165,057,822 162,497,439 Net assets, end of year $133,550,817 128,884,352 36,500,506 36,307,969 170,051,323 165,192,321 Governmental activities Business-type activities Total Governmental activities increased the Kodiak Island Borough’s net assets by $4,800,964. The major differences in revenues were an increase of $1,382,449 in property taxes due to property re-appraisals, $320,990 in severance taxes due to a good fishing year and an increase in investment earnings of $1,075,489 due to an increase in the overall market. There were some major changes in expenses including a decrease of $827,849 in general government caused by a decrease in capital expenditures, and a decrease of $850,507 in primary and secondary education also caused by a decrease in capital expenditures. 15 KODIAK ISLAND BOROUGH Management’s Discussion and Analysis June 30, 2012 Business type activities increased the Kodiak Island Borough’s net assets by $192,537, compared to an increase of $250,477 in the prior year. There were no major changes between years. Current Year Versus Prior Year Prior Year Expenses Governmental Activities 0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 14,000,000 General government Public safety Community and economic development Emergency preparedness Health and Sanitation department Education, culture and recreation Parks and recreation Service district maintenance Primary and secondary education Interest on long term debtFY2012 FY2011 For more detailed information see the statement of activities on page 22. Financial Analysis of the Government’s Funds As noted earlier, the Kodiak Island Borough uses fund accounting to ensure and demonstrate compliance with finance related legal requirements. Governmental Funds – The focus of the Kodiak Island Borough’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Kodiak Island Borough’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the Kodiak Island Borough’s governmental funds reported combined ending fund balances of $55,170,765, an decrease of $3,130,275 in comparison to the beginning of the year. $5,280,922 of this total amount constitutes nonspendable fund balances, $37,288,510 is committed fund balances, $11,464,575 is assigned fund balances and $1,136,758 is unassigned fund balances. 16 KODIAK ISLAND BOROUGH Management’s Discussion and Analysis June 30, 2012 The main reasons for this decrease are as follows: • $13,578,039 was realized on the sale of a refunding bond; however, $12,180,000 was paid to the refunding bond escrow agent. The Borough issued an $8,000,000 general obligation bond in the prior year. • Interest earnings were $1,150,736 more than last year. • Capital outlay - school expenditures were $3,373,968 more than than last year due mainly to construction on the Kodiak High School renovation project. The General Fund is the main operating fund of the Kodiak Island Borough. At the end of the current fiscal year, nonspendable fund balance of the General Fund was $166,020 with unassigned fund balance of $3,126,037 for a total fund balance of $3,292,057. As a measure of the General Fund’s liquidity, it may be useful to compare fund balance to total expenditures. Unassigned fund balance represents 59% of total General Fund expenditures. The fund balance of the Kodiak Island Borough’s General Fund increased by $1,332,499 during the current fiscal year. The key factor leading to this change was an increase in severance taxes of $320,990, and a decrease in the amount of funds transferred out to other funds by $1,142,909. The fund balance of the Education Support Special Revenue Fund decreased by $71,269 during the current fiscal year. The key factor leading to this change was a decrease in property tax revenue collected. The fund balance of the Kodiak Island Borough’s Facilites Special Revenue Fund increased by $610,023 during the current fiscal year. The key factor leading to this increase was a large improvement in investment earnings. The fund balance of the Kodiak Island Borough’s Education and Health Debt Service Fund decreased by $202,893 during the current fiscal year. The key factor leading to this decrease was a reduction in the amount of funds transferred in to this fund. The fund balance of the Kodiak Island Borough’s Renewal and Replacement Projects Capital Project Fund decreased by $738,678 during the current fiscal year. The key factor leading to this was a budgeted use of assigned fund balance to balance the FY2012 budget. The fund balance of the Kodiak Island Borough’s Kodiak High School Renovation Capital Project Fund decreased by $3,711,740 during the current fiscal year. The key factor leading to this decrease was a budgeted use of assigned fund balance to balance the FY2012 budget. The project started in fiscal year 2012 and the fund balance will be spent down in future years as the project is completed. Proprietary Funds – The Kodiak Island Borough’s proprietary funds provide the same type of information found in the government wide financial statements, but in more detail. Net assets of the Municipal Solid Waste Collection and Disposal Enterprise fund amounted to $5,268,849, the Hospital Facilities Enterprise Fund amounted to $20,884,148, the Kodiak Fisheries Research Center Enterprise Fund amounted to $10,299,682 and the 911 Services Enterprise Fund amounted to $47,827. The total increase in net assets for the Municipal Solid Waste Collection and Disposal Enterprise Fund was $158,510. The total decrease in net assets for the Hospital Facilities Enterprise Fund was $30,153. The total increase in net assets for the Kodiak Fisheries Research Center Enterprise Fund was $16,353. The assets in the 911 Services Enterprise Fund increased by $47,827. Other factors concerning the finances of these four funds have already been addressed in the discussion of the Kodiak Island Borough’s business-type activities. 17 KODIAK ISLAND BOROUGH Management’s Discussion and Analysis June 30, 2012 2012 Program Revenues Versus Expenses 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 Municipal Solid Waste Hospital Facilites Kodiak Fisheries Research Center 911 Service Revenues Expenses General Fund Budgetary Highlights Differences between the original budget and final amended budget can be briefly summarized as follows: • The revenue budget for personal property tax was increased $15,300. • The revenue budget for fish severance tax was increased $40,000. • The revenue budget for state raw fish tax was increased by $138,000. • The revenue budget for payment in lieu of taxes remained constant. • The expenditure budget for the Borough manager department increased by $20,000. • The expenditure budget for building official department increased by $75,000. • The expenditure budget for economic development increased by $40,000. • The primary and secondary education budget decreased by $331,871 . Differences between the final amended budget and actual can be summarized as follows: • Real property taxes were $9,800 more than budgeted. This was due to tax collections after year end. • Personal property taxes were $79,036 more than budgeted. This was due to tax collections after year end. • Penalties and interest on revenues taxes were $11,433 more than budgeted. This was due to more aggressive collection efforts than in previous years. • Severance taxes for fish were $455,255 more than budgeted. This was due to an increased harvest of wild fish. 18 KODIAK ISLAND BOROUGH Management’s Discussion and Analysis June 30, 2012 • State payments for fish revitalization were $67,360 more than budgeted. This was due to increased state aid. • State on behalf PERS payments were $105,681 more than budgeted. This was due to an increase in the State’s budget for aid to the various political subdivisions of the State. • Federal payments in lieu of taxes were $112,645 over budget. This was due to increased federal funding. • Investment income was $156,792 more than budgeted. This was due to an overall increase in the market in the current year. • The Finance Department came in $28,582 under budget. This was due to salaries and retirement costs coming in under budget. • The Management Information Systems deparment came in $165,454 under budget. This was due mainly to unfilled positions, and not buying budgeted equipment. • The Assessing department came in $92,105 under budget. This was due to not purchasing budgeted equipment and vacant positions. • The Building Official department came in $45,422 under budget. This was due to contracted services coming in under budget. • The Education, Culture, and Recreation department was $32,396 under budget. This was due to outside audit expenses coming in under budget. Capital Asset and Debt Administration Capital Assets – The Kodiak Island Borough’s investment in capital assets for its governmental and business - type activities as of June 30, 2012, amounted to $151,162,037 (net of accumulated depreciation). This investment in capital assets includes, land, buildings and improvements, improvements other than buildings, machinery and equipment, and construction work-in-progress. The total net increase in the Kodiak Island Borough’s investments in capital assets for the current fiscal year was $7,287,321 which was mostly due to increases in construction work in process. The following table displays the capital assets (net of depreciation) for the current year. Governmental Business-type activities activities Total 2012 2011 2012 2011 2012 2011 Artwork $— — 16,091 16,091 16,091 16,091 Land 23,467,304 23,467,304 1,661,499 1,661,499 25,128,803 25,128,803 Construction work-in-progress 21,179,832 34,988,650 10,702,700 7,517,347 31,882,532 42,505,997 Buildings and improvements 49,558,157 38,338,541 23,151,975 24,499,588 72,710,132 62,838,129 Improvements other than buildings 15,553,506 6,860,940 1,884,409 2,084,848 17,437,915 8,945,788 Equipment 967,647 1,049,895 848,143 1,033,116 1,815,790 2,083,011 Infrastructure 1,119,397 1,263,465 — — 1,119,397 1,263,465 Unclassified plant in service — — 1,051,377 1,093,432 1,051,377 1,093,432 $111,845,843 105,968,795 39,316,194 37,905,921 151,162,037 143,874,716 Additional information on the Kodiak Island Borough’s capital assets can be found in note 6 on pages 43-47of this report. 19 KODIAK ISLAND BOROUGH Management’s Discussion and Analysis June 30, 2012 Long-Term Debt – At the end of the current fiscal year, the Kodiak Island Borough had total bonded debt outstanding of $31,480,000. This entire amount is backed by the full faith and credit of the Borough. The remainder of the Kodiak Island Borough’s debt represents loans and notes payable, compensated absencese and landfill closure and post-closure costs. The following table displays the long-term debt for the current year. Governmental Business-type activities activities Total 2012 2011 2012 2011 2012 2011 General obligation bonds, including premium $33,510,913 35,124,211 — — 33,510,913 35,124,211 ADEC loans 49,433 55,209 — — 49,433 55,209 Compensated absences 249,444 255,208 — — 249,444 255,208 Landfill post closure care costs — — 5,397,945 5,132,343 5,397,945 5,132,343 Long term interfund borrowings — — 5,097,805 5,611,261 5,097,805 5,611,261 Notes payable — — 7,603,249 2,735,778 7,603,249 2,735,778 $33,809,790 35,434,628 18,098,999 13,479,382 51,908,789 48,914,010 The Kodiak Island Borough’s total debt increased by $2,994,779 during the current fiscal year. This increase was mostly due to the Municipal Solid Waste Collection and Disposal Enterprise Fund selling $3,275,000 of revenue bonds and the Education and Health Debt Service Fund issuing $11,615,000 of refunding bonds. Total debt service payments during the year were $14,960,776 of principal of general obligation bonds. There is no general obligation debt limit imposed on the Kodiak Island Borough by the State Constitution, state statutes or the Borough’s charter or code. Additional information on the Kodiak Island Borough’s long-term debt can be found in note 8 on pages 50-58 of this report. Economic Factors and Next Year’s Budgets and Rates • At June 30, 2012, the unemployment rate for the Kodiak Island Borough was 5.3%, which is .7% lower than last year’s rate of 6.0%. The average unemployment rate for the last 10 years has been 7.9%. • Property tax revenues received are projected to increase in future years as the Kodiak Island Borough’s assessed valuation continues to increase. • The PERS (Public Employees Retirement System) rate has increased from 0% in FY2004 to 33.49% in FY2012. The State of Alaska set a ceiling of 22% on all political subdivisions and contributed the additional 11.49%. Requests for Information This financial report is designed to provide a general overview of the Kodiak Island Borough’s finances for all those with an interest. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Kodiak Island Borough, Director of Finance, 710 Mill Bay Kodiak, Alaska 99615. 20 REQUIRED SUPPLEMENTARY INFORMATION 21 KODIAK ISLAND BOROUGH Statement of Net Assets June 30, 2012 (With summarized financial information for June 30, 2011) Component Primary government unit Total reporting entity Governmental Business-type School Assets activities activities Total District 2012 2011 Equity in central treasury $53,479,725 13,700,040 67,179,765 51,400 67,231,165 68,451,293 Due from primary government — — — 4,354,077 4,354,077 3,852,641 Receivables: State of Alaska 1,039,237 2,052,742 3,091,979 2,433,534 5,525,513 1,933,233 Federal government 232,183 80,714 312,897 — 312,897 1,127,324 Property taxes, net of allowance of $15,828 400,373 — 400,373 — 400,373 136,115 Severance taxes 528,236 — 528,236 — 528,236 453,028 Land sales contracts receivable 25,062 — 25,062 — 25,062 34,375 Accounts and other receivables, net 125,932 280,407 406,339 — 406,339 1,487,346 Deferred charges 196,453 — 196,453 — 196,453 135,670 Inventories — 277,007 277,007 442,310 719,317 697,752 Prepaid items 167,608 — 167,608 5,090 172,698 16,916 Capital assets: Non-depreciable 44,647,136 12,380,290 57,027,426 — 57,027,426 67,650,891 Depreciable, net 67,198,707 26,935,904 94,134,611 531,666 94,666,277 76,753,585 Total $168,040,652 55,707,104 223,747,756 7,818,077 231,565,833 222,730,169 Liabilities and Net Assets Liabilities: Accounts payable $1,032,602 806,648 1,839,250 325,408 2,164,658 2,389,274 Accrued compensation and related liabilities 241,304 91,287 332,591 3,582,860 3,915,451 4,092,286 Other accrued liabilities 247,601 138,526 386,127 — 386,127 938,982 Customer deposits 2,250 — 2,250 — 2,250 150 Unearned revenues 89,716 — 89,716 84,887 174,603 78,743 Due to component unit 4,354,077 — 4,354,077 — 4,354,077 3,852,641 Internal balances (5,168,943) 5,168,943 — — — — Noncurrent liabilities: Due within one year 2,714,239 255,000 2,969,239 568,840 3,538,079 3,319,481 Due in more than one year 30,976,989 7,348,249 38,325,238 — 38,325,238 35,016,077 Landfill closure costs — 5,397,945 5,397,945 — 5,397,945 5,132,343 Total liabilities 34,489,835 19,206,598 53,696,433 4,561,995 58,258,428 54,819,977 Net assets: Invested in capital assets, net of related debt 85,285,497 31,967,945 117,253,442 531,666 117,785,108 117,489,278 Restricted: ARRA Impact Aid — — — — — 883 Pupil transportation — — — — — 217,147 Unrestricted 48,265,320 4,532,561 52,797,881 2,724,416 55,522,297 50,202,884 Net assets 133,550,817 36,500,506 170,051,323 3,256,082 173,307,405 167,910,192 Total $168,040,652 55,707,104 223,747,756 7,818,077 231,565,833 222,730,169 See accompanying notes to financial statements. 22 Program revenues Net (expense) revenue and changes in net assets Operating Primary government Component unit Charges for grants and Capital Governmental Business-type School Total reporting entity Functions/Programs Expenses services contributions grants activities activities Total District 2012 2011 Primary government: Governmental activities: General government $4,281,383 673,050 251,939 — (3,356,394) — (3,356,394) — (3,356,394) (4,450,769) Public safety 622,396 11,646 29,956 — (580,794) — (580,794) — (580,794) (608,296) Community and economic development 1,195,237 — — 281,421 (913,816) — (913,816) — (913,816) 2,049,304 Emergency preparedness 21,423 — — — (21,423) — (21,423) — (21,423) (11,705) Health and sanitation department 391,996 — 108,629 — (283,367) — (283,367) — (283,367) (286,316) Education, culture and recreation 64,289 — — — (64,289) — (64,289) — (64,289) (85,690) Parks and recreation 5,825 — — — (5,825) — (5,825) — (5,825) (13,625) Service district maintenance 705,665 1 — — (705,664) — (705,664) — (705,664) (565,788) Primary and secondary education 11,998,842 — — 293,018 (11,705,824) — (11,705,824) — (11,705,824) (12,834,349) Interest on long-term debt 1,188,945 — 2,088,739 — 899,794 — 899,794 — 899,794 640,341 Total governmental activities 20,476,001 684,697 2,479,263 574,439 (16,737,602) — (16,737,602) — (16,737,602) (16,166,893) Business-type activities: Municipal solid waste collection and disposal 2,345,752 2,301,757 42,936 — — (1,059) (1,059) — (1,059) 205,847 Hospital facilities 1,016,882 720,000 — 97,534 — (199,348) (199,348) — (199,348) (307,615) Kodiak Fisheries Research Center 1,746,521 1,636,728 32,883 — — (76,910) (76,910) — (76,910) 171,320 911 services 2,615 — — — — (2,615) (2,615) — (2,615) — Total business-type activities 5,111,770 4,658,485 75,819 97,534 — (279,932) (279,932) — (279,932) 69,552 Total primary government 25,587,771 5,343,182 2,555,082 671,973 (16,737,602) (279,932) (17,017,534) — (17,017,534) (16,097,341) Component unit - School district $49,967,483 236,527 11,545,868 19,459 (38,165,629) (38,165,629) (39,419,856) General revenues: Property taxes 13,327,552 — 13,327,552 — 13,327,552 11,945,103 Grants and entitlements not restricted to specific programs 4,199,766 — 4,199,766 28,134,011 32,333,777 31,231,720 Land sales 4,540 — 4,540 — 4,540 2,383 Severance taxes 1,970,265 — 1,970,265 — 1,970,265 1,649,275 Support from primary government — — — 10,250,350 10,250,350 9,494,388 Other 327,540 110,442 437,982 184,979 622,961 1,103,884 Investment earnings 1,788,903 282,027 2,070,930 — 2,070,930 814,339 Transfers (80,000) 80,000 — — — — Total general revenues and transfers 21,538,566 472,469 22,011,035 38,569,340 60,580,375 56,241,092 Change in net assets 4,800,964 192,537 4,993,501 403,711 5,397,212 723,895 Net assets, at beginning of year, as previously stated 128,884,352 36,307,969 165,192,321 2,852,371 168,044,691 167,320,796 Prior period adjustment (134,499) — (134,499) — (134,499) — Net assets, at beginning of year, as restated 128,749,853 36,307,969 165,057,822 2,852,371 167,910,192 167,320,796 Net assets, at end of year $133,550,817 36,500,506 170,051,323 3,256,082 173,307,404 168,044,691 See accompanying notes to financial statements. KODIAK ISLAND BOROUGH Statement of Activities Year ended June 30, 2012 (With summarized financial information for the year ended June 30, 2011) 23 KODIAK ISLAND BOROUGH Balance Sheet June 30, 2012 (With summarized financial information for the year ended June 30, 2011) Education and Health Renewal and Kodiak High OtherEducationDebt Service Replacement School Governmental Assets General Support Facilities Fund Projects Renovation Funds 2012 2011 Assets: Equity in central treasury $331,891 4,198,981 34,298,260 55,591 64,988 3,813,016 10,716,998 53,479,725 56,894,725 Receivables: State of Alaska 26,387 54,618 — 622,540 282,554 — 53,138 1,039,237 1,027,084 Federal government 185,661 — — — — — 46,522 232,183 116,731 Property taxes, net of — — allowance of $15,828 212,723 145,365 — 24,787 — — 17,498 400,373 136,115 Severance taxes 528,236 — — — — — — 528,236 453,028 Land sales contracts — — — — — — 9,553 9,553 12,671 Accounts and other receivables, net 68,159 — — — 1,279 — 56,494 125,932 80,521 Prepaid items 166,020 — — — — — 1,588 167,608 7,680 Due from other funds 2,524,561 — 540,780 — — — — 3,065,341 1,950,188 Land sales contracts, due after one year — — — — — — 15,509 15,509 21,704 Advances to other funds — — 5,097,805 — — — — 5,097,805 5,097,806 Total $4,043,638 4,398,964 39,936,845 702,918 348,821 3,813,016 10,917,300 64,161,502 65,798,253 Liabilities and Fund Balances Liabilities: Accounts payable 320,340 116,156 — 485 65,603 321,228 208,790 1,032,602 1,723,821 Accrued compensation and related liabilities 122,742 — — — — — — 122,742 220,229 Customer deposits — — — — — — 2,250 2,250 150 Due to component unit — 4,354,077 — — — — — 4,354,077 3,919,549 Due to other funds — — — 900,000 1,826,164 — 268,039 2,994,203 1,359,801 Deferred revenues 308,499 — 71,139 — — — 105,225 484,863 273,663 Total liabilities 751,581 4,470,233 71,139 900,485 1,891,767 321,228 584,304 8,990,737 7,497,213 Fund balances: Nonspendable 166,020 — 5,097,805 — — — 17,097 5,280,922 28,505 Committed — — 34,767,901 — — — 2,520,609 37,288,510 57,633,409 Assigned — — — — — 3,491,788 7,972,787 11,464,575 — Unassigned 3,126,037 (71,269) — (197,567) (1,542,946) — (177,497) 1,136,758 639,126 Total fund balances 3,292,057 (71,269) 39,865,706 (197,567) (1,542,946) 3,491,788 10,332,996 55,170,765 58,301,040 Total $4,043,638 4,398,964 39,936,845 702,918 348,821 3,813,016 10,917,300 64,161,502 65,798,253 See accompanying notes to financial statements. Totals Governmental Funds Capital Project Funds Special Revenue Funds 24 Amount reported as fund balances on the governmental funds balance sheet $55,170,765 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds.111,845,843 Long-term receivables, delinquent property taxes and loans are not available to pay for current-period expenditures and, therefore, are deferred in the funds: Property taxes $308,499 Interest receivable 71,139 Notes receivable - land sales 15,509 395,147 Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds: General obligation bonds payable (31,480,000) Bond premium (2,030,913) ADEC loans (49,433) Deferred financing costs 196,453 Accrued interest expense (247,601) Compensated absences (249,444) (33,860,938) Net assets of governmental activities $133,550,817 See accompanying notes to financial statements. KODIAK ISLAND BOROUGH Reconciliation of Net Assets Between the Year ended June 30, 2012 Government-Wide Financial Statements and the Fund Financial Statements 25 Education and Health Renewal and Kodiak High Other Education Debt Service Replacement School Governmental General Support Facilities Fund Projects Renovation Funds 2012 2011 Revenues: Property taxes and assessments $321,360 9,747,209 — 1,613,194 83,241 — 1,287,594 13,052,598 11,909,806 Transient accomodations tax — — — — — 87,400 87,400 96,384 Severance taxes 1,970,265 — — — — — — 1,970,265 1,649,275Intergovernmental:— — State sources 2,776,534 — — 2,088,739 293,018 — 154,801 5,313,092 7,029,684Federal sources 1,648,913 — — — — — 291,463 1,940,376 2,149,205 Charges for services 1,011 — — — — — 612,914 613,925 614,745Licenses, permits and fees 65,421 — — — — — 5,351 70,772 105,073 Investment income 281,792 — 1,172,584 6,628 — 167,559 228,850 1,857,413 706,677Other15,166 — — — — — 29,138 44,304 720,659 Total revenues 7,080,462 9,747,209 1,172,584 3,708,561 376,259 167,559 2,697,511 24,950,145 24,981,508 Expenditures: Current:General government 3,755,708 — — 13,994 — — 1,079,103 4,848,805 4,818,287 Public safety — — — — — — 447,479 447,479 537,623Community and — — economic development 1,121,327 — — — — 73,910 1,195,237 1,211,189Emergency preparedness 18,923 — — — — — — 18,923 11,705 Health and sanitation department 286,300 — — — — — 105,696 391,996 392,011Education, culture — and recreation 64,289 — — — — — — 64,289 85,690Parks and recreation 5,825 — — — — — — 5,825 13,625 Service district maintenance — — — — — — 705,665 705,665 593,388Primary and secondary education 87,000 10,250,349 — — — — — 10,337,349 10,127,350 Capital outlay:Schools — — — — 965,099 3,879,299 410,639 5,255,037 1,881,069 General — — — — 213,058 — 348,949 562,007 4,839,652Debt service: Principal — — — 2,780,776 — — — 2,780,776 2,750,690Interest— — — 2,691,426 — — 4,231 2,695,657 1,292,645 Debt issuance costs — — — 100,149 — — — 100,149 40,689 Total expenditures 5,339,372 10,250,349 — 5,586,345 1,178,157 3,879,299 3,175,672 29,409,194 28,595,613 Excess (deficiency) of revenuesover (under) expenditures 1,741,090 (503,140) 1,172,584 (1,877,784) (801,898) (3,711,740) (478,161) (4,459,049) (3,614,105) Other financing sources (uses):Proceeds from sale of bonds — — — — — — — — 8,049,233Refunding bonds issued — — — 11,615,000 — — — 11,615,000 — Premium on refunded bonds issued — — — 1,963,039 — — — 1,963,039 — Payment to refunded bond escrow agent — — — (12,180,000) — — — (12,180,000) — Land sale proceeds — — — — — — 10,735 10,735 15,021Transfers in — 431,871 — 276,852 63,220 — 185,709 957,652 3,782,289Transfers out (408,591) — (562,561) — — — (66,500) (1,037,652) (3,862,289) Net other financingsources (uses)(408,591) 431,871 (562,561) 1,674,891 63,220 — 129,944 1,328,774 7,984,254 Change in fund balances 1,332,499 (71,269) 610,023 (202,893) (738,678) (3,711,740) (348,217) (3,130,275) 4,370,149 Fund balance (deficit), at beginning of year as previously stated 1,959,558 — 39,255,683 5,326 (804,268) 7,203,528 10,815,712 58,435,539 54,065,390 Prior period adjustment — — — — — — (134,499) (134,499) — Fund balances (deficit), at beginning of year as restated 1,959,558 — 39,255,683 5,326 (804,268) 7,203,528 10,681,213 58,301,040 54,065,390 Fund balances (deficits), at end of year $3,292,057 (71,269) 39,865,706 (197,567) (1,542,946) 3,491,788 10,332,996 55,170,765 58,435,539 See accompanying notes to financial statements. Totals KODIAK ISLAND BOROUGH Statement of Revenues, Expenditures and Changes Year ended June 30, 2012 (With summarized financial information for the year ended June 30, 2011) in Fund Balances (Deficits) Governmental Funds Capital Project Funds Special Revenue Funds 26 KODIAK ISLAND BOROUGH Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances (Deficits) Year ended June 30, 2012 Change in fund balances – total governmental funds $(3,130,275) Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense: Capital outlay $9,287,341 Depreciation expense (3,410,293) 5,877,048 Certain revenues in the statement of activities do not provide current financial resources and are deferred in the funds: Deferred property tax 308,499 Interest income 71,139 Land sale proceeds 15,509 395,147 Certain revenues that were earned in a prior year provide current financial resources: Accrued property tax (120,945) Accrued interest income (92,750) Land sale contracts (21,704) (235,399) The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds do not report the accrual of interest expense on debt when it is not payable from currently available resources: Bond issuance costs 100,149 Refunded bond issuance costs (26,196) Interest expenditures applied to accrued interest 208,822 Issuance of long term debt (11,615,000) Principal repayments 14,960,776 Amortized debt issuance costs (13,170) Bond premium (1,963,039) Bond premium pay off 72,960 Bond premium amortization 163,377 1,888,679 Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds: Compensated absences, net change 5,764 Change in net assets of governmental activities $4,800,964 See accompanying notes to financial statements. of Governmental Funds to the Statement of Activities 27 KODIAK ISLAND BOROUGH Year ended June 30, 2012 (With summarized financial information for the year ended June 30, 2011) Municipal Kodiak Other Solid Waste Fisheries NonmajorCollection and Hospital Research Enterprise Totals Assets Disposal Facilities Center Fund 2012 2011 Current assets: Equity in central treasury $7,755,665 2,091,394 3,812,736 40,245 13,700,040 11,497,584 Customer receivables 272,293 — 532 7,582 280,407 237,170 Accounts receivable: State of Alaska 2,043,870 8,872 — — 2,052,742 845,783 Federal government — 80,714 — — 80,714 — Due from other funds — — — — — 2,580 Total current assets 10,071,828 2,180,980 3,813,268 47,827 16,113,903 12,583,117 Inventories — 277,007 — — 277,007 277,007 Capital assets: Non-depreciable 6,196,212 6,184,078 — — 12,380,290 9,194,937 Depreciable, net 2,737,441 13,483,827 10,714,636 — 26,935,904 28,710,984 Total capital assets 8,933,653 19,667,905 10,714,636 — 39,316,194 37,905,921 Total noncurrent assets 8,933,653 19,944,912 10,714,636 — 39,593,201 38,182,928 Total $19,005,481 22,125,892 14,527,904 47,827 55,707,104 50,766,045 Liabilities and Net Assets Current liabilities: Accounts payable $547,629 208,939 50,080 — 806,648 325,336 Accrued compensation andrelated liabilities 64,488 — 26,799 — 91,287 91,287 Other accrued liabilities 123,321 — 15,205 — 138,526 482,559 Current portion of advancesfrom other funds — 76,423 470,000 — 546,423 513,455 Current portion of notes payable 255,000 — — — 255,000 — Due to other funds — — 71,138 — 71,138 79,512 Total current liabilities 990,438 285,362 633,222 — 1,909,022 1,492,149 Noncurrent liabilities: Notes payable 7,348,249 — — — 7,348,249 2,735,778 Advances from other funds — 956,382 3,595,000 — 4,551,382 5,097,806 Accrual for landfill closure and postclosure costs 5,397,945 — — — 5,397,945 5,132,343 Total noncurrent liabilities 12,746,194 956,382 3,595,000 — 17,297,576 12,965,927 Total liabilities 13,736,632 1,241,744 4,228,222 — 19,206,598 14,458,076 Net assets: Invested in capital assets, net of related debt 1,330,404 19,667,905 10,714,636 — 31,967,945 35,170,143 Unrestricted (deficit)3,938,445 1,216,243 (414,954) 47,827 4,532,561 1,137,826 Total net assets 5,268,849 20,884,148 10,299,682 47,827 36,500,506 36,307,969 Total $19,005,481 22,125,892 14,527,904 47,827 55,707,104 50,766,045 See accompanying notes to financial statements. Proprietary Funds - Business - Type Activities - Enterprise Funds Statement of Net Assets 28 KODIAK ISLAND BOROUGH Statement of Revenues, Expenses, and Changes in Net Assets Year ended June 30, 2012 (With summarized financial information for the year ended June 30, 2011) Municipal Kodiak Other Solid Waste Fisheries Nonmajor Collection and Hospital Research Enterprise Totals Disposal Facilities Center Fund 2012 2011 Operating revenues: Charges for services: Solid waste collection $— — — — — 8,414 Solid waste disposal 2,301,757 — — — 2,301,757 2,374,861 Lease income — 720,000 1,636,728 — 2,356,728 2,732,864 Other — 60,000 — 50,442 110,442 53,041 Total operating revenues 2,301,757 780,000 1,636,728 50,442 4,768,927 5,169,180 Operating expenses: Personnel services 755,407 10,344 322,367 2,500 1,090,618 1,053,092 Refuse disposal — — — — — 29,119 Contracted services 329,425 — — — 329,425 111,446 Maintenance and repairs 127,287 1,786 8,878 — 137,951 21,747 Landfill closure and postclosure costs 265,602 — — — 265,602 374,716 Depreciation 289,927 853,229 631,924 — 1,775,080 1,780,683 General and administration 210,384 — 386,458 — 596,842 719,553 Miscellaneous — — 104,644 115 104,759 77,749 Telephone services — — — — — 49,962 Recycling services 235,429 — — — 235,429 235,339 Contributions 64,673 — — — 64,673 5,688 Total operating expenses 2,278,134 865,359 1,454,271 2,615 4,600,379 4,459,094 Operating income (loss)23,623 (85,359) 182,457 47,827 168,548 710,086 Other income (expense): Intergovernmental: State sources-grants — 97,534 — — 97,534 — State of Alaska on-behalf payment 42,936 — 32,883 — 75,819 20,587 Contribution to Providence Hospital — (108,000) — — (108,000) (108,000) Investment income 146,069 42,695 93,263 — 282,027 100,925 Interest expense (67,618) (43,523) (292,250) — (403,391) (553,121) Total other income (expense)121,387 (11,294) (166,104) — (56,011) (539,609) Income (loss) before transfers 145,010 (96,653) 16,353 47,827 112,537 170,477 Transfers in 13,500 66,500 — — 80,000 80,000 Change in net assets 158,510 (30,153) 16,353 47,827 192,537 250,477 Net assets, at beginning of year 5,110,339 20,914,301 10,283,329 — 36,307,969 36,057,492 Net assets, at end of year $5,268,849 20,884,148 10,299,682 47,827 36,500,506 36,307,969 See accompanying notes to financial statements. Proprietary Funds - Business - Type Activities - Enterprise Funds 29 KODIAK ISLAND BOROUGH Statement of Cash Flows Year ended June 30, 2012 (With summarized financial information for the year ended June 30, 2011) Municipal Kodiak Other Solid Waste Fisheries Nonmajor Collection and Hospital Research Enterprise Totals Disposal Facilities Center Fund 2012 2011 Cash flows from operating activities: Cash received from customers $1,063,506 690,414 1,636,882 47,215 3,438,017 4,877,834 Payments to suppliers (900,004) 99,153 (480,441) (50,077) (1,331,369) (1,551,104) Payments to employees (712,471) (10,344) (289,915) (2,500) (1,015,230) (1,032,505) Net cash provided (used) by operating activities (548,969) 779,223 866,526 (5,362) 1,091,418 2,294,225 Cash flows from noncapital financing activities: State sources - grants — 97,534 — — 97,534 — Contribution to Providence Hospital — (108,000) — — (108,000) (108,000) Internal activity – payments to/from other funds (675) 2,580 (7,699) — (5,794) (145,473) Transfers in 13,500 66,500 — — 80,000 80,000 Net cash provided (used) by noncapital financing activities 12,825 58,614 (7,699) — 63,740 (173,473) Cash flows from capital and related financing activities: Acquisition and construction of capital assets (3,018,912) (166,441) — — (3,185,353) (1,040,749) Interest paid on notes payable and interfund borrowings (67,618) (43,523) (292,250) — (403,391) (553,121) Principal payments on long-term interfund borrowing — (73,456) (440,000) — (513,456) (355,391) Proceeds from issuance of notes payable 4,867,471 — — — 4,867,471 745,783 Net cash provided (used) by capital and related financing activities 1,780,941 (283,420) (732,250) — 765,271 (1,203,478) Cash flows from investing activities: Interest and dividends received 146,069 42,695 93,263 — 282,027 54,550 Net change in cash and cash equivalents 1,390,866 597,112 219,840 (5,362) 2,202,456 971,824 Cash and equivalents, at beginning of year 6,364,799 1,494,282 3,592,896 45,607 11,497,584 10,525,760 Cash and equivalents, at end of year $7,755,665 2,091,394 3,812,736 40,245 13,700,040 11,497,584 (continued) Proprietary Funds - Business - Type Activities - Enterprise Funds 30 KODIAK ISLAND BOROUGH Statement of Cash Flows Year ended June 30, 2012 (With summarized financial information for the year ended June 30, 2011) Municipal Kodiak Other Solid Waste Fisheries Nonmajor Collection and Hospital Research Enterprise TotalsDisposalFacilitiesCenterFund2012 2011 Reconciliation of operating income (loss) to net cash provided by operating activities: Operating income (loss)$23,623 (85,359) 182,457 47,827 168,548 710,086 Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation 289,927 853,229 631,924 — 1,775,080 1,780,683 State of Alaska on-behalf payments 42,936 — 32,883 — 75,819 20,587 Accrual for landfill closure and postclosure costs 265,602 — — — 265,602 374,716 Changes in assets and liabilities that provided (used) cash: (Increase) decrease in assets: Customer receivables (40,164) — 154 (3,227) (43,237) 454,437 Accounts receivable - State of Alaska (1,198,087) (89,586) — — (1,287,673) (745,783) Increase (decrease) in liabilities: Accounts payable 426,432 100,939 3,903 (49,962) 481,312 (10,348) Other accrued liabilities (359,238) — 15,205 — (344,033) (49,610) Unearned revenues — — — — — (240,543) Net cash provided (used) by operating activities $(548,969) 779,223 866,526 (5,362) 1,091,418 2,294,225 See accompanying notes to financial statements. Proprietary Funds - Business - Type Activities - Enterprise Funds, (Continued) KODIAK ISLAND BOROUGH Notes to Basic Financial Statements June 30, 2012 (1) Summary of Significant Accounting Policies (a) Reporting Entity The Kodiak Island Borough (the Borough), Alaska, was organized to perform the municipal duties allowed by Alaska Statutes and as directed by its residents. As required by accounting principles generally accepted in the United States of America, these financial statements present the government and its component unit, an entity for which the government is considered to be financially accountable. The discretely presented component unit is reported in a separate column in both the government-wide and fund financial statements to emphasize it is legally separate from the government. The Borough reviewed its relationship with other organizations and determined that the following organization is a component unit. Discretely Presented Component Unit The Borough has delegated the operating responsibility for public education to the Kodiak Island Borough School District (School District). In accordance with statutes, the Borough retains ownership of the education related capital assets and incurs the debt, if necessary, to finance the acquisition and construction of school facilities. The Borough Assembly approves the total annual budget of the School District and may, during the year, increase the total appropriation. Complete financial statements for the component unit may be obtained at the entity’s administrative offices for the Kodiak Island Borough School District. Kodiak Island Borough School District 722 Mill Bay Road Kodiak, Alaska 99615 (b) Government-Wide and Fund Financial Statements The government wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the activities of the primary government and its component unit. For the most part, the effect of inter-fund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from the legally separate component unit for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. 31 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds, if applicable, are reported as separate columns in the fund financial statements. (c) Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period except for grant revenues which are recognized when the related expenditure is incurred irrespective of when the cash is received. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes and interest associated with the current fiscal period are all considered to be susceptible to accrual and have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the government. The government reports the following major governmental funds: The General Fund is the government’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Education Support Special Revenue Fund accounts for property taxes and assessments dedicated to school district support activity. The Facilities Special Revenue Fund accounts for the proceeds from the sale of Shuyak Island. The single most important goal is to preserve the principal of the fund. Interest earnings, after inflation proofing, can be used for debt service, building insurance and capital projects. The Education and Health Debt Service Fund was established to finance and account for the payment of interest and principal on all general obligation debts, serial and term, other than that payable exclusively from special assessments and revenue debt issued for and serviced by a government enterprise fund. 32 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued The Renewal and Replacement Capital Project Fund accounts for rents on the Borough owned hospital; hospital related state revenue sharing; and other hospital related revenue. In turn, it purchases hospital equipment and makes debt service payments on hospital related debt. The Kodiak High School Renovation Capital Project Fund accounts for the construction and major maintenance activities for the Borough’s educational facilities funded by school bonds. The government reports the following major proprietary funds: The Municipal Solid Waste Collection and Disposal Fund accounts for the collection and disposal of solid waste and recycling services for the Kodiak Island Borough. The Hospital Facilities Fund accounts for rents on the Borough owned hospital; hospital related state revenue sharing; and other hospital related revenue. In turn, it purchases hospital equipment and makes debt service payments on hospital related debt. The Kodiak Fisheries Research Center Fund accounts for rents and expenses on the Borough owned Kodiak Fisheries Research Center. The three tenants: NOAA, Alaska Department of Fish & Game and University of Alaska, Fairbanks pay lease funds to participate in this multi-agency research facility committed to the preservation of the North Pacific marine ecosystem and resources. Private sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private sector guidance for their business type activities and enterprise funds, subject to this same limitation. The government has elected not to follow subsequent private sector guidance. As a general rule the effect of inter-fund activity has been eliminated from the government wide financial statements. Exceptions to this general rule are charges between various functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include (1) charges to customers or applicants for goods, services, or privileges provided, (2) operating grants and contributions, and (3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the enterprise funds are charges to customers for sales and services and lease revenues. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. 33 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued (d) Assets, Liabilities, and Fund Equity/Net Assets Cash and Investments Cash and temporary investments of Borough funds are pooled in a central treasury. Each fund’s portion of this pool is displayed on the Balance Sheet and Statement of Net Assets as “Equity in Central Treasury”. The Borough participates in the Alaska Municipal League Investment Pool (AMLIP). The AMLIP is considered to be an external investment pool as defined by GASB Statement No. 31. AMLIP is not SEC registered and is unrated. Alaska Statute 37.23 establishes regulatory oversight of the pool. The law sets forth numerous requirements regarding authorized investments and reporting. The pool is incorporated in the State of Alaska as a nonprofit corporation and reports to its Board of Directors. Alaska Statute 37.23.050 requires the retention of an investment manager. The AMLIP manager is required to produce monthly disclosure statements to the pool. The pool has also retained an investment advisor to monitor the performance of the investment manager and to ensure compliance with investment policies. All participation in the pool is voluntary. The pool must maintain a dollar weighted average maturity of 90 days or less, and only purchase instruments having remaining maturities of 397 days or less. On a monthly basis, the investments in the pool are reviewed for fair value by an independent pricing service. All highly liquid investments, excluding restricted assets, with original maturities of ninety days or less are considered to be cash equivalents. For purposes of the Statements of Cash Flows, equity in central treasury held by enterprise funds are treated as cash equivalents. Investments for the government, as well as the component unit, are reported at fair value, as determined by quoted market prices. The reported value of the pool is the same as the fair value of the pool shares. Receivables and Payables Activity between funds that are representative of lending /borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion of inter-fund loans) or “advances to/from other funds” (i.e., the noncurrent portion of inter-fund loans). Any residual balances outstanding between the governmental activities and business type activities are reported in the government wide financial statements as “internal balances.” Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. Inventories and Prepaid Items/Expenses Expendable operating supplies of the Borough are accounted for using the purchases method. There are no significant amounts of such inventories on hand at year end. The entire Hospital Enterprise Fund inventory is assigned to Providence as of April 21, 1997. According to the terms of the lease agreement for the hospital facilities [see note 12(a)], those items are required to be returned to the Borough at the termination of the lease in at least equal value. 34 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued Payments made to vendors for services that are applicable to future accounting periods are recorded as prepaid items. The prepaid assets do not reflect current available resources and, thus, an equivalent portion of fund balance is classified as nonspendable in the fund financial statements. Prepaid items and expenses are based on the consumption method. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, street lights, and similar items including those acquired prior to fiscal years ended after June 30, 1980), are reported in the applicable governmental or business type activities columns in the government-wide financial statements. Capital assets are defined by the Borough as assets with an initial, individual cost of more than $5,000 (amount not rounded) and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business type activities is included as part of the capitalized value of the assets constructed. There was no interest capitalized during the year. Property, plant, and equipment of the primary government is depreciated using the straight line method over the following estimated useful lives: Buildings and improvements 10-40 years Improvements other than buildings 10-15 years Equipment 5-10 years Infrastructure 40 years Compensated Absences It is the Borough’s policy to permit employees to accumulate earned but unused annual leave benefits. All annual leave pay is accrued when incurred in the government wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. Long-term Obligations In the government wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business type activities, or proprietary fund Statement of Net Assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. 35 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Interest on long-term obligations is recorded as an expenditure when due. Net Assets In the government wide financial statements, net assets are reported in three categories; net assets invested in capital assets net of related debt, restricted net assets and unrestricted net assets. Net assets are reported as restricted when constraints placed on net asset use are either externally imposed by creditors (such as through debt covenants), grantors, contributors provisions or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation. Fund Balance In the Fund Financial Statements, fund balance includes five classifications as follows: Nonspendable Fund Balance – amounts that are legally or contractually required to be maintained intact (such as the corpus of an endowment fund) or amounts that are not in a spendable form (such as inventory, prepaid expenses, supplies, and long-term receivables). Such constraint is binding until the legal or contractual requirement is repealed or the amounts become spendable. Restricted Fund Balance – amounts constrained to specific purposes by their providers (such as grantors and higher levels of government), through constitutional provisions, or by enabling legislation. Such constraint is binding unless modified or rescinded by external body, laws, or regulation. Committed Fund Balance – amounts that can be used only for the specific purposes determined by a formal action of the Borough Assembly, the Borough’s highest level of decision-making authority. Commitments may be changed or lifted by the Assembly taking the same formal action that imposed the constraint originally. The formal action that is required to be taken to establish, modify or rescind a fund balance commitment is for the Assembly to pass a resolution. Assigned Fund Balance – amounts intended to be used by the Borough for specific purposes: intent can be expressed by the Assembly or by the Finance Director or designee. Such constraint is binding unless modified or eliminated by the Assembly or Finance Director. In governmental funds other than the General Fund, assigned fund balance represents the amount that is not restricted or committed. Unassigned Fund Balance – amounts not contained in the other classifications and available for any purpose. Positive unassigned amounts will be reported only in the General Fund. If another governmental fund, other than the General Fund, has a fund balance deficit, then it will be reported as a negative amount in the unassigned classification in that fund. 36 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued The order of spending, regarding the restricted and unrestricted fund balance when an expenditure is incurred for which both restricted and unrestricted fund balance is available should first reduce restricted fund balance and then unrestricted fund balance. The order of spending regarding unrestricted fund balance is that committed amounts should be reduced first, followed by the assigned amounts, and then the unassigned amounts when expenditures are incurred for purposes for which amounts in any of those unrestricted fund balance classifications could be used. Compliance with the provisions of the Fund Balance Classification Policy are reviewed as part of the annual budget adoption process. The Finance Director reports to the Assembly as close to the end of the year as possible the anticipated year-end fund balance or deficit. The Assembly takes appropriate action to commit or assign, or otherwise allocate prior year fund balances as a part of the budget planning process. The Borough’s Special Revenue Funds are used to account for school district support, fire and road service areas, federal and state grant programs, street lighting districts, and operations and maintenance programs that are restricted or committed. (e) Revenues, Expenditures, and Expenses Property Taxes Property taxes are based on the assessed value of taxable property as of January 1. Pursuant to Alaska Statute 29.45.240, the Borough establishes the mill rate on or before June 15th. Tax bills are then mailed on or before July 1st. Taxes are due when billed and generally become delinquent on or after October 16th. The Borough code also provides for split payments. If a taxpayer avails himself of this provision, one-half must be paid on or before August 15th and the remainder becomes due on or before November 15th (in lieu of October 15th). Borough property tax revenues are recognized in the fiscal year in which they become measurable and available, which is generally the year following the year the tax bills are mailed. All taxes are delinquent on November 16th, and a tax foreclosure process may commence as outlined in Alaska Statutes Title 29. Briefly, this entails the petition for Judgment of Foreclosure signed by the District Court Judge and the publication of all delinquent taxes in the local newspaper for four consecutive weeks. Real property tax liens are enforced by one general foreclosure proceeding against the delinquent properties. Prior to FY2012 all area wide property taxes were deposited into the General Fund and then transferred to the other area wide funds. In FY2012 the Borough set a separate mill rate for each area wide funcition that was funded by property taxes. The Borough set a mill rate of .03 mills for the General Fund, 9.09 mills for the Education Support Special Revenue Fund, 1.55 mills for the Debt Service Fund and .08 mills for the Renewal and Replacement Projects Capital Project Fund for a total area wide mill rate of 10.75. This was .25 mills more than the FY2011 mill rate of 10.50 mills. 37 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued Severance Taxes Severance taxes are based on the amount and value of natural resources severed from the environment. Types of resources taxed include seafood, gravel and mineral resources, and timber. Severance tax returns are sent to appropriate companies (as determined by the Borough Assessor) and are returned to the Borough Finance Department. The returns are filed quarterly, and are due by the end of the month following the quarter’s end. Borough severance tax revenues are recognized in the fiscal year in which they become measurable and available. Intergovernmental Revenue State shared revenues, safe communities, State education related entitlement programs and State levied taxes, the proceeds of which are distributed to local governments, are recorded in the fiscal year to which they relate, including accrual at year end if final payments due are measurable and received within approximately two months after year end. State of Alaska and Federal government cost reimbursable grants and contracts are recorded to the extent of allowable expenditures in the period in which the expenditures were incurred. When both restricted and unrestricted resources are available for use for governmental activities, it is the Borough’s policy to use restricted resources first, then unrestricted resources as they are needed. Operating and Nonoperating Revenue and Expenses Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the Municipal Solid Waste Collection and Disposal Fund and 911 Services Fund are charges to customers for services. The principal operating revenues of the Hospital Facilities Fund and the Kodiak Fisheries Research Center Fund are rents from customers. Operating expenses for proprietary funds include costs of services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. Revenue from Investments and Property Amounts earned on investment of available cash balances and the rental of building facilities are recorded in the period to which they relate, including accrual at year end of the balance due, and unrealized gains and losses on investments held at fiscal year end. Land Sales Proceeds and Other Local Revenues Amounts received pursuant to land sale contracts are recorded on the modified accrual basis in the fund financial statements and the accrual basis in the government-wide financial statements. Other local revenues are recorded on a basis consistent with their nature in relation to measurement and availability standards. 38 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued (f) Cash Flows All highly liquid investments, excluding restricted assets, with original maturities of three months or less are considered cash equivalents for purposes of the statement of cash flows. (g) Use of Estimates Preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in these financial statements. Actual results may differ from the estimates. Significant estimates include the allowance for doubtful accounts, the useful lives of assets and related accumulated depreciation, and accrued landfill closure and post-closure care costs. (2) Stewardship, Compliance, and Accountability (a) Excess of Expenditures over Appropriations The following fund expenditures exceeded their budget: Excess Special Revenue Funds: Womens Bay Road Service Area $102,505 Bay View Road Service Area 6,550 Woodland Acres Street Light Service Area 11,326 Total expenditures exceeding budgets $120,381 Fund (b) Deficit Fund Equity The individual fund deficits at June 30, 2012, are as follows: Special Revenue Funds: Education Support $71,269 Fire Protection Area No.1 104,779 Womens Bay Road Service Area 14,146 Bay View Road Service Area 10,694 L.E.P.C.16,762 Trinity Islands Paving 32,693 Renewal and Replacement Projects Capital Project Fund 1,542,946 Education and Health Debt Service Fund 197,567 Total fund deficits $1,990,856 The deficit in the Education Support Fund will be funded by a mill rate increase of one half mill that will be started in FY2013. The deficit in the Fire Protection Area No. 1 will be covered by a reduction in expenditures in FY2013. 39 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued The deficit in Womens Bay Road Service Area Fund will be funded by a reduction in expenditures in FY2013. The deficit in Bay View Road Service Area Fund will be funded by a mill rate increase of one half mill that will be started in FY2013. The deficit in the L.E.P.C. Fund will be covered by fund revenues in FY2013. The deficit in the Trinity Islands Paving Fund is anticipated to be funded by a special assessment that began in 2006. The deficit in the Renewal and Replacement Projects Capital Projects Fund will be covered by a loan from the Facilities Special Revenue Fund, which will then be repaid by a mill rate increase. The deficit in the Education and Health Debt Service Fund will be funded by a mill rate increase of one half mill that will be started in FY2013. (3) Cash and Investments A portion of the Borough’s investments are in the Alaska Municipal League Investment Pool (AMLIP). The investment in AMLIP represents the Borough’s share of ownership in the pool rather than ownership of specific securities. The fair values of the investments in the pool approximates amortized cost and is equal to the value of pool shares. To obtain a copy of AMLIP’s financial statements contact Key Trust of Alaska at 101 West Benson Blvd., Room 302, Anchorage, Alaska 99503. As of June 30, 2012, the Borough had the following investments: Fair Less Investment Type Value than 1 1 to 5 6 to 10 U.S. Agency Securities: Federal Home Loan Bank $23,543,344 4,911,504 12,917,260 5,714,580 Federal Home Loan Mortgage Corporation 10,064,240 6,045,580 4,018,660 - Federal Farm Credit Bank 8,135,972 4,042,740 2,859,272 1,233,960 Federal National Mortgage Association 9,294,020 - 9,294,020 - Municipal Obligations 10,056,577 - 2,944,190 7,112,387 Alaska Municipal League Investment Pool 4,000,001 4,000,001 - - $65,094,154 18,999,825 32,033,402 14,060,927 Investment Maturities (in years) In addition to the investments listed above, Kodiak Island Borough also had cash equivalents of $2,085,611. Interest Rate Risk The Borough’s investment policy does not limit investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. 40 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued Credit Risk Statutes authorize the Borough to invest in obligations of the United States, the State of Alaska and its political subdivisions, savings accounts, certificates of deposit, banker’s acceptances, repurchase agreements, and such other legal security instruments. The Borough does not have a formal investment policy that restricts investments based on credit risk. At June 30, 2012, the Borough’s U.S. agencies bonds were rated AAA by Standard & Poor and Fitch Ratings, and AAA by Moody’s Investor Service. At June 30, 2012, the Borough’s investment in the Alaska Municipal League Investment Pool was unrated. Concentration of Credit Risk The Borough places no limit on the amount the Borough may invest in any one issuer. At June 30, 2012, the Borough had 78% percent of its investments in U.S. Government agency securities. Custodial Credit Risk – Deposits The Borough maintains a cash pool that is available for use by all funds. Each fund’s portion of this pool is reported on the Balance Sheet and Statements of Net Assets as “Equity in Central Treasury” or amounts “due to/from other funds.” The Borough bank accounts that are noninterest-bearing transaction accounts are provided with unlimited balance protection by the Federal Depository Insurance Corporation (FDIC). Interest-bearing accounts are insured by the FDIC to a maximum of $250,000. U.S. Treasury obligations collateralize the remaining bank balance, which is held by Bank of New York in a Tri-party collateral agreement with Wells Fargo, the pledging financial institution’s agent, in the Borough’s name. Custodial Credit Risk – Investments For an investment, this is a risk that, in the event of the failure of the counterparty, the Borough will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The Borough manages its custodial credit risk in investments by requiring collaterialization agreements. The Borough had no debt securities exposed to custodial credit risk at June 30, 2012. (4) Annual Appropriation to the School District An annual appropriation is made to the School District. In addition to the annual appropriation, the Borough provides the School District, without charge, general liability and property insurance, data processing services, the annual independent audit, mental health services, and grounds maintenance services. 41 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued (5) Receivables Education and Education and Renewal and Other Total General Support Special Health Debt Replacement Governmental Governmental Fund Revenue Fund Service Fund Capital Project Fund Funds Funds Receivables: Grants $212,048 54,618 622,540 282,554 99,660 1,271,420 Taxes 756,787 145,365 24,787 — 17,498 944,437 Customers and other 68,159 — — 1,279 59,852 129,290 Gross receivables 1,036,994 199,983 647,327 283,833 177,010 2,345,147 Less: allowance for uncollectibles (15,828) — — — — (15,828) Net total receivables $1,021,166 199,983 647,327 283,833 177,010 2,329,319 Municipal Kodiak Other Solid Waste Fisheries Nonmajor Total Total Total Collection Hospital Research Enterprise Enterprise Governmental Primary and Disposal Facilities Center Fund Funds Funds Government Receivables: Grants $2,043,870 89,586 — — 2,133,456 1,271,420 3,404,876 Taxes — — — — — 944,437 944,437 Customers and other 272,293 — 532 7,582 280,407 129,290 409,697 Gross receivables 2,316,163 89,586 532 7,582 2,413,863 2,345,147 4,759,010 Less: allowance for uncollectibles — — — — — (15,828) (15,828) Net total receivables $2,316,163 89,586 532 7,582 2,413,863 2,329,319 4,743,182 Enterprise Funds Governmental Funds Governmental funds report deferred revenues in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of deferred revenue and unearned revenue reported in the governmental funds were as follows: Unavailable Unearned Total Deferred property taxes receivable $ 308,499 - 308,499 Deferred land sales receivable 15,509 - 15,509 Grant advances prior to expending all proceeds - 160,855 160,855 Total deferred/unearned revenue for governmental funds $ 324,008 160,855 484,863 42 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued (6) Capital Assets As noted in Footnote (12), the Borough leases the Kodiak Island Hospital and Care Center to Sisters of Providence. The value of the leased assets and associated depreciation are reflected in the Hospital Facilities Fund following. Capital asset activity for the year ended June 30, 2012 was as follows: Beginning Ending Balance Increase Decrease Balance Governmental activities: Capital assets, not being depreciated: Land $23,467,304 — — 23,467,304 Construction work-in-progress 34,988,650 — (13,808,818) 21,179,832 Total 58,455,954 — (13,808,818) 44,647,136 Capital assets, being depreciated: Buildings and improvements 97,890,186 13,808,818 — 111,699,004 Improvements other than buildings 11,385,461 9,242,340 — 20,627,801 Equipment 2,822,571 45,001 — 2,867,572 Infrastructure 5,762,722 — — 5,762,722 Total 117,860,940 23,096,159 — 140,957,099 Less accumulated depreciation for: Buildings and improvements 59,551,645 2,589,202 — 62,140,847 Improvements other than buildings 4,524,521 549,774 — 5,074,295 Equipment 1,772,676 127,249 — 1,899,925 Infrastructure 4,499,257 144,068 — 4,643,325 Total 70,348,099 3,410,293 — 73,758,392 Total capital assets being depreciated, net 47,512,841 19,685,866 — 67,198,707 Total governmental activities, net $105,968,795 19,685,866 (13,808,818) 111,845,843 43 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued Beginning Ending Balance Increase Decrease Balance Business-type activities: Municipal Solid Waste Collection and Disposal Fund capital assets, not being depreciated: Land $1,651,248 — — 1,651,248 Construction work-in-progress 1,526,052 3,018,912 — 4,544,964 Total 3,177,300 3,018,912 — 6,196,212 Capital assets, being depreciated: Unclassified utility plant in service 2,178,733 — — 2,178,733 Improvements other than buildings 2,288,438 — — 2,288,438 Machinery and equipment 2,003,735 — 2,003,735 Total 6,470,906 — — 6,470,906 Less accumulated depreciation for: Unclassified utility plant in service 1,085,301 42,055 — 1,127,356 Improvements other than buildings 1,043,031 124,778 — 1,167,809 Machinery and equipment 1,315,206 123,094 — 1,438,300 Total 3,443,538 289,927 — 3,733,465 Total capital assets being depreciated, net 3,027,368 (289,927) — 2,737,441 Total Municipal Solid Waste Collection and Disposal Fund, net $6,204,668 2,728,985 — 8,933,653 44 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued Beginning Ending Balance Increase Decrease Balance Hospital Facilities Fund capital assets, not being depreciated: Artwork $16,091 — — 16,091 Land 10,251 — — 10,251 Construction work-in-progress 5,991,295 166,441 — 6,157,736 Total 6,017,637 166,441 — 6,184,078 Capital assets, being depreciated: Buildings 27,131,044 — — 27,131,044 Improvements other than buildings 401,046 — — 401,046 Machinery and equipment 3,627,068 — — 3,627,068 Total 31,159,158 — — 31,159,158 Less accumulated depreciation for: Buildings 13,337,464 752,934 — 14,090,398 Improvements other than buildings 198,811 40,703 — 239,514 Machinery and equipment 3,285,827 59,592 — 3,345,419 Total 16,822,102 853,229 — 17,675,331 Total capital assets being depreciated, net 14,337,056 (853,229) — 13,483,827 Total Hospital Facilities Fund, net $20,354,693 (686,788) — 19,667,905 Kodiak Fisheries Research Center Fund capital assets, being depreciated: Buildings $17,840,410 — — 17,840,410 Improvements other than buildings 1,048,760 — — 1,048,760 Machinery and equipment 1,157,540 — — 1,157,540 Total 20,046,710 — — 20,046,710 Less accumulated depreciation for: Buildings 7,134,402 594,679 — 7,729,081 Improvements other than buildings 411,554 34,958 — 446,512 Machinery and equipment 1,154,194 2,287 — 1,156,481 Total 8,700,150 631,924 — 9,332,074 Total Kodiak Fisheries $11,346,560 (631,924) — 10,714,636 45 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued Beginning Ending Balance Increase Decrease Balance Total business-type activities: Capital assets, not being depreciated: Artwork $16,091 — — 16,091 Land 1,661,499 — — 1,661,499 Construction work-in-progress 7,517,347 3,185,353 — 10,702,700 Total 9,194,937 3,185,353 — 12,380,290 Capital assets, being depreciated: Unclassified utility plant in service 2,178,733 — — 2,178,733 Buildings 44,971,454 — — 44,971,454 Improvements other than buildings 3,738,244 — — 3,738,244 Machinery and equipment 6,788,343 — — 6,788,343 Total 57,676,774 — — 57,676,774 Less accumulated depreciation for: Unclassified utility plant in service 1,085,301 42,055 — 1,127,356 Buildings 20,471,866 1,347,613 — 21,819,479 Improvements other than buildings 1,653,396 200,439 — 1,853,835 Machinery and equipment 5,755,227 184,973 — 5,940,200 Total 28,965,790 1,775,080 — 30,740,870 Total capital assets being depreciated, net 28,710,984 (1,775,080) — 26,935,904 Total business-type activities, net $37,905,921 1,410,273 — 39,316,194 46 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued Depreciation expense was charged to the departments and functions of the primary government as follows: Governmental activities: General government $331,227 Public safety 174,917 Emergency preparedness 2,500 Primary and secondary education 2,901,649 Total – governmental activities 3,410,293 Business-type activities: Municipal solid waste collection and disposal 289,927 Hospital facilities 853,229 Kodiak fisheries research center 631,924 Total – business-type activities 1,775,080 Total $5,185,373 (7) Interfund Receivables, Payables and Transfers (a) Interfund Receivables and Payables Interfund balances at June 30, 2012 consisted of the following: Receivable Fund Payable Fund Amount Major governmental funds: General Fund Education and Health Debt Service Fund $900,000 Renewal and Replacement Capital Project Fund 1,600,000 Other Governmental Funds 24,561 Facilities Special Revenue Fund Renewal and Replacement Capital Project Fund 226,164 Other Governmental Funds 243,478 Hospital Facilities Enterprise Fund 1,032,805 Kodiak Fisheries Research Center Enterprise Fund 4,136,138 Total primary government $8,163,146 The balance of $4,136,138 due the Facilities Fund from the K.F.R.C. Fund resulted from a loan of $8,000,000 that was made to help pay for the construction of the building. $3,595,000 is not scheduled to be paid in FY2013 and is recorded as a noncurrent liability in advances to/from other funds. The balance of $1,032,805 due the Facilities Special Revenue Fund from the Hospital Facilities Enterprise Fund resulted from a loan of $1,600,000 that was made to pay for part of the cost of a lawsuit. $956,382 is not scheduled to be paid in FY2013 and is recorded as a noncurrent liability in advances to/from other funds. 47 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued All remaining balances were short term loans to cover negative cash balances at year end. The outstanding short term balances between funds result from the time lag between the dates that (1) inter-fund goods and services are provided or reimbursable expenditures or expenses occur, (2) transactions are recorded in the accounting system, and (3) payments between funds are made. (b) Long-term Interfund Borrowings In October 1997 the Facilities Special Revenue Fund loaned $8,000,000 to the Kodiak Fisheries Research Center Enterprise Fund. This loan was to help finance the construction of the Kodiak Fisheries Research Center. The loan from the Facilities Special Revenue Fund is accounted for as a long-term inter-fund advance, while the liability in the Kodiak Fisheries Research Center Enterprise Fund is accounted for as a long-term inter-fund borrowing. The advance bears interest at 7%, and the scheduled payments for the next five fiscal years ended and thereafter are as follows: Principal Interest Total Year ending June 30: 2013 $470,000 268,100 738,100 2014 500,000 234,150 734,150 2015 540,000 197,750 737,750 2016 575,000 158,725 733,725 615,000 69,300 684,300 2018-2019 1,365,000 144,900 1,509,900 $4,065,000 1,072,925 5,137,925 2017 In July 2003, the Facilities Special Revenue Fund loaned $1,600,000 to the Hospital Facilities Enterprise Fund in order to help fund current operations. The loan from the Facilities Special Revenue Fund is accounted for as a long-term interfund advance, while the liability in the Hospital Facilities Enterprise Fund is accounted for as a long-term interfund borrowing. The advance bears interest at 4%, and the scheduled payments for the next five fiscal years and thereafter are as follows: Principal Interest Total Year ending June 30: 2013 $76,423 40,556 116,979 2014 79,510 37,468 116,978 2015 82,723 34,256 116,979 2016 86,065 30,916 116,981 2017 89,542 27,467 117,009 2018-2022 504,983 79,877 584,860 2023 113,559 3,418 116,977 $1,032,805 253,958 1,286,763 48 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued (c) Transfers Interfund transfers have been made in accordance with budget ordinances. Funds are transferred from one fund to support expenditures of other funds in accordance with the authority established for the individual fund. Transfers between funds during the year ended June 30, 2012, were as follows: Education Education Renewal and Municipal Support and Health Replacement Other Solid Waste Hospital Special Revenue Debt Service Capital Project Governmental Collection and FacilitiesFundFundFundFundsDisposal Fund Fund Totals Major Governmental Funds: General Fund $331,871 — 63,220 — 13,500 — 408,591 Facilities Special Revenue Fund 100,000 276,852 — 185,709 — — 562,561 Other Governmental Funds — — — — — 66,500 66,500 Total transfers $431,871 276,852 63,220 185,709 13,500 66,500 1,037,652 Transfers Out Enterprise Funds Transfers In Governmental Funds A summary of significant transfers are as follows: • The General Fund transferred $331,871 to the Education Support Special Revenue Fund to cover school district support. • The General Fund transferred $63,220 to the Renewal and Replacement Capital Project Fund to pay for FY2012 expenditures. • The General Fund transferred $13,500 to the Municipal Solid Waste Collection and Disposal Enterprise Fund to pay for garbage disposal for area thrift shops. • The Facilities Special Revenue Fund transferred $100,000 to the Education Support Special Revenue Fund to cover school district insurance costs. • The Facilities Special Revenue Fund transferred $276,852 to the Education and Health Debt Service Fund for debt service on school district and hospital bonds. • The Facilities Special Revenue Fund transferred $40,000 to the Building and Grounds Special Revenue Fund to pay additional snow removal costs at school sites. • The Facilities Special Revenue Fund transferred $145,709 to the Borough Capital Projects Fund to pay for capital improvements. • The Fern Fuller Trust Special Revenue Fund transferred $66,500 to the Hospital Facilities Enterprise Fund for the purchase of new equipment. 49 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued (8) Long Term Debt (a) General Obligation Bonds and other Debt The Borough issues general obligation bonds and other debt to provide funds for the acquisition and construction of major capital facilities. General obligation bonds are direct obligations and pledge the full faith and credit of the Borough. General obligation bonds and other debt currently outstanding are as follows: Rates Dates Issue dates Maturity dates Dates Amount General Obligation bonds – 2004 C Series 4.0-5.0%1/1-7/1 7/21/2004 7/1/2014 07/01/13 415,000 07/01/14 435,000 850,000 General obligation bonds – 2004 D Series 3.0-5.0%5/1-11/1 12/1/2004 11/1/2014 11/01/12 490,000 11/01/13 510,000 11/01/14 530,000 1,530,000 General obligation bonds – 2008 A Series 4.0-5.0%4/1-10/1 11/1/2008 4/1/2028 04/01/13 300,000 04/01/14 320,000 04/01/15 335,000 04/01/16 350,000 04/01/17 370,000 04/01/18 380,000 04/01/19 400,000 04/01/20 415,000 04/01/21 430,000 04/01/22 450,000 04/01/23 470,000 04/01/24 490,000 04/01/25 515,000 04/01/26 540,000 04/01/27 565,000 04/01/28 595,000 6,925,000 Type of debt 50 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued Authorized Prior years Balance at Retired/Balance at Fiscal year Amount Issued Retired July 1, 2011 Issued Refunded June 30, 2012 2004 9,300,000 9,300,000 2,565,000 6,735,000 — 5,885,000 850,000 2004 11,050,000 11,050,000 2,350,000 8,700,000 — 7,170,000 1,530,000 2008 8,000,000 8,000,000 785,000 7,215,000 — 290,000 6,925,000 51 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued Interest Principal payments Rates Dates Issue dates Maturity dates Dates Amount General obligation bonds – 2009 A Series 3.0 - 4.0%2/1-8/1 4/9/2009 2/1/2014 02/01/13 1,390,000 02/01/14 1,445,000 2,835,000 General obligation bonds – 2011 Series One 1.10-5.20%9/1-3/1 3/1/2011 3/1/2031 03/01/13 285,000 03/01/14 295,000 03/01/15 305,000 03/01/16 310,000 03/01/17 320,000 03/01/18 330,000 03/01/19 340,000 03/01/20 355,000 03/01/21 370,000 03/01/22 385,000 03/01/23 405,000 03/01/24 425,000 03/01/25 445,000 03/01/26 465,000 03/01/27 485,000 03/01/28 510,000 03/01/29 535,000 03/01/30 565,000 03/01/31 595,000 7,725,000 Type of debt 52 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued Authorized Prior years Balance at Retired/Balance at Fiscal year Amount Issued Retired July 1, 2011 Issued Refunded June 30, 2012 2009 6,740,000 6,740,000 2,570,000 4,170,000 — 1,335,000 2,835,000 2011 8,000,000 8,000,000 — 8,000,000 — 275,000 7,725,000 53 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued Interest Principal payments Rates Dates Issue date Maturity dates Dates Amount General obligation bonds – 2012 Series A 2.0-5.0%3/1-9/1 5/24/2012 9/1/2024 9/1/2012 35,000 9/1/2013 — 9/1/2014 — 9/1/2015 435,000 9/1/2016 455,000 9/1/2017 460,000 9/1/2018 480,000 9/1/2019 495,000 9/1/2020 525,000 9/1/2021 545,000 9/1/2022 570,000 9/1/2023 600,000 9/1/2024 630,000 5,230,000 General obligation bonds – 2012 Series B 2.0-5.0%3/1/-9/1 5/24/2012 9/1/2024 9/1/2012 45,000 9/1/2013 — 9/1/2014 — 9/1/2015 530,000 9/1/2016 550,000 9/1/2017 565,000 9/1/2018 585,000 9/1/2019 610,000 9/1/2020 640,000 9/1/2021 665,000 9/1/2022 695,000 9/1/2023 730,000 9/1/2024 770,000 6,385,000 ADEC loans Clean water – Karluk 3.92 – 4.05%******6/1/2013 5,862 6/1/2014 5,950 6/1/2015 6,039 6/1/2016 6,130 6/1/2017 6,222 6/1/2018 6,315 6/1/2019 6,410 6/1/2020 6,505 49,433 $31,529,433 Type of debt 54 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued Authorized Prior years Balance at Retired/Balance at Fiscal year Amount Issued Retired July 1, 2011 Issued Refunded June 30, 2012 2012 5,230,000 — — — 5,230,000 — 5,230,000 2012 6,385,000 — — — 6,385,000 — 6,385,000 1998 400,000 97,019 41,810 55,209 — 5,776 49,433 $55,105,000 43,187,019 8,311,810 34,875,209 11,615,000 14,960,776 31,529,433 55 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued (b) Debt Defeasance On May 4, 2012 the Kodiak Island Borough refinanced the 2004C and 2004D bond issuances. This resulted in a total savings, based on the net present value of the new debt, of approximately $385,909 and $483,424, respectively. These tables shows the savings by year. FY2012 FY2012 Refunding Prior Refunding Prior Bond Bond Issue Bond Bond Issue Total Total Total Total FY2013 209,699$ 244,271$ FY2013 258,186$ 304,350$ FY2014 226,800 244,271 FY2014 276,750 304,350 FY2015 226,800 244,271 FY2015 276,750 304,350 FY2016 653,100 685,271 FY2016 796,150 843,350 FY2017 655,300 686,636 FY2017 794,550 840,950 FY2018 646,600 681,695 FY2018 792,900 842,650 FY2019 652,400 685,424 FY2019 795,550 841,800 FY2020 645,425 682,799 FY2020 793,600 843,225 FY2021 649,925 683,651 FY2021 792,350 838,413 FY2022 645,900 683,114 FY2022 788,050 837,362 FY2023 645,750 681,073 FY2023 787,375 838,000 FY2024 646,500 682,001 FY2024 786,750 835,125 FY2025 645,750 680,961 FY2025 789,250 835,375 7,149,949$ 7,565,438$ 8,728,211$ 9,309,300$ 2004C 2004D The annual requirements to amortize all general obligation bonded debt and the ADEC loan payable outstanding as of June 30, 2012, are as follows: General ADEC obligation loan payable Total Interest Year ending June 30: 2013 $2,960,000 5,862 2,965,862 1,396,520 2014 3,005,000 5,950 3,010,950 1,236,510 2015 1,170,000 6,039 1,176,039 1,287,135 2016 1,625,000 6,130 1,631,130 1,068,560 2017 1,695,000 6,222 1,701,222 1,002,360 2018-2022 9,425,000 19,230 9,444,230 4,005,700 2023-2027 8,800,000 — 8,800,000 1,744,273 2028-2031 2,800,000 — 2,800,000 319,568 $31,480,000 49,433 31,529,433 12,060,626 At June 30, 2012, there was $0 available in the Education and Health Debt Service Fund to service general obligation bonds. There are a number of limitations and restrictions contained in the various bond indentures. The Borough is in compliance with all significant limitations and restrictions. 56 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued (c) Notes Payable As of June 30, 2012, the Borough had the following notes payable outstanding in the Municipal Solid Waste Collection and Disposal Enterprise Fund: Note payable to Alaska Department of Environmental Conservation (ADEC), to be paid within 20 years. From June 2, 1999 until April 28, 2005 interest accrued at 2.5%. From April 29, 2005 to June 30, 2011 interest accrued at 1.5%. The first loan payment was made on April 1, 2012, with payments of $100,000 being due on April 1 in each successive year.$1,900,000 Note payable to Alaska Department of Environmental Conservation (ADEC), to be paid within 20 years. Interest accrued at 3.8% over the life of the loan. The first loan payment is due one year following sustantial completion and initiation of operation of the facility.$2,043,870 On September 15, 2011 the Borough issued a $3,275,000 revenue bond, with a premium of $384,379. The bond was marketed by the Alaska Municipal Bond Bank. Interest accrues at rates between 3.0 and 5.0% with payments due on September 1 and March 1 of each year. The bond will mature on September 1, 2026.$3,659,379 57 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued (d) Changes in Long-term Liabilities Long-term liability activity for the year ended June 30, 2012, was as follows: Balance Balance June 30,June 30,Due within 2011 Additions Reductions 2012 one year Governmental activities: Bonds payable: General obligation bonds $34,820,000 11,615,000 14,955,000 31,480,000 2,545,000 Bond premium 304,211 1,963,039 236,337 2,030,913 163,377 35,124,211 13,578,039 15,191,337 33,510,913 2,708,377 ADEC loans 55,209 — 5,776 49,433 5,862 Compensated absences 255,208 112,798 118,562 249,444 118,562 Total $35,434,628 13,690,837 15,315,675 33,809,790 2,832,801 Business-type activities: Municipal Solid Waste Collection and Disposal: Landfill closure and post-closure costs $5,132,343 265,602 — 5,397,945 — Notes payable 2,735,778 4,967,471 100,000 7,603,249 255,000 Total $7,868,121 5,233,073 100,000 13,001,194 255,000 Hospital Facilities: Long term interfund borrowings $1,106,261 — 73,456 1,032,805 76,423 Total $1,106,261 — 73,456 1,032,805 76,423 Kodiak Fisheries Research Center: Long term interfund borrowings $4,505,000 — 440,000 4,065,000 470,000 Total $4,505,000 — 440,000 4,065,000 470,000 Business-type activities: Landfill closure and post- closure costs $5,132,343 265,602 — 5,397,945 — Long term interfund borrowings 5,611,261 — 513,456 5,097,805 546,423 Notes payable 2,735,778 4,967,471 100,000 7,603,249 255,000 Total $13,479,382 5,233,073 613,456 18,098,999 801,423 For governmental activities, compensated absences are generally liquidated by the General Fund. 58 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued (9) Fund Balances Detailed information related to amounts classified as nonspendable, committed and assigned fund balances in governmental funds at June 30, 2012 are as follows: Education Education Facilities and Health Renewal and Kodiak High Other General Support Special Special Debt Replacement School Governmental Fund Revenue Fund Revenue Fund Service Fund Project Renovation Funds Total Nonspendable: Prepaid items $166,020 - - - - - 1,588 167,608 Advances - - 5,097,805 - - - - 5,097,805 Long term receivables - - - - - - 15,509 15,509 Total nonspendable $166,020 - 5,097,805 - - - 17,097 5,280,922 Committed: Facility upgrades - - 34,767,901 - - - - 34,767,901 Fire and Road Service Areas - - - - - - 948,627 948,627 Coastal Management - - - - - - 27,133 27,133 Land Sales - - - - - - 740,036 740,036 Buildings and Grounds - - - - - - 233,823 233,823 Street Lighting Districts - - - - - - 22,620 22,620 Tourism Development - - - - - - 128,968 128,968 Mission Lake Tide Gate - - - - - - 26,601 26,601 Fern Fuller Trust - - - - - - 392,801 392,801 Total assigned $- - 34,767,901 - - - 2,520,609 37,288,510 Assigned: Capital projects and upgrades $- - - - - 3,491,788 7,972,787 11,464,575 Capital Project Funds (10) Solid Waste Landfill Closure and Post Closure Care Costs State and federal laws and regulations require that the Kodiak Island Borough place a final cover on its landfill when closed and perform certain maintenance for a number of years after closure. In addition to operating expenses related to current activities of the landfill, an expense provision and related liability are recognized based on the future closure and post closure care costs that will be incurred based on the date the landfill no longer accepts waste. The recognition of these landfill closure and post closure care costs is based on the amount of the landfill used during the year. The estimated liability of landfill closure and post closure care costs is $5,397,945 as of June 30, 2012, which is based on 84% usage (filled) of the landfill. 59 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued The landfill is estimated to be filled and unusable by the year 2014. Of the total liability at June 30, 2012, an increase of $265,602 was recorded in the current year based on current year usage and changes in estimates. An estimated additional $878,735 will be recognized as closure and post closure care expenses between the date of the Statement of Net Assets and the date the landfill is expected to be filled to capacity. The estimated total current cost of the landfill closure and post closure care of $6,276,680 is based on the amount that would be paid if the landfill were closed as of June 30, 2012. However, the actual cost of closure and post closure care may be higher due to inflation, changes in technology, or changes in landfill laws and regulations. The Kodiak Island Borough is required by state and federal laws and regulations to make annual contributions to finance closure and post closure care. The Kodiak Island Borough complies with these requirements by annually recording the liability based on the estimates provided by the Kodiak Island Borough’s Engineering/Facilities Director. It is anticipated that future inflation costs and additional costs that might arise from changes in post closure requirements, due to changes in technology or more rigorous environmental regulations, for example, will be financed primarily by charges to future landfill users and secondarily by taxpayers. In the fiscal year ended June 30, 1999 the Borough began initial planning for lateral expansion of the landfill (Phase 3). In May of 2012 bidding on the project was begun and work is ongoing and expected to continue through 2015. The lateral expansion has an estimated nine to twelve year capacity. Capital costs to complete is estimated between $4,105,809 and $6,276,680. (11) Insurance and Risk Retention The Kodiak Island Borough is exposed to numerous risks of loss associated with the operations of a government. These potential losses include, but are not limited to, employee relations and injuries, contracts, theft, loss or damage of property and general liability. The Borough manages its risks from these potential losses by participating in the Alaska Municipal League Joint Insurance Association, as well as purchasing commercial insurance coverage. This insurance has provided the Borough with adequate coverage in the past. There were no significant changes in insurance coverage obtained and there were no claims or settlements that exceeded insurance coverage in any of the past three fiscal years. The Borough is a member in good standing of the Alaska Municipal League Joint Insurance Association (JIA), a governmental insurance pool established by the Alaska Municipal League. Claims are covered on an occurrence basis. JIA provides risk management services, appraisal services and there is also a separate pool for policy liability. The Kodiak Island Borough Finance Director and the Kodiak Island Borough Mayor are members of the Board of Directors of the JIA. The responsibilities of both JIA and the participants are as follows: (a) Responsibilities of JIA JIA shall perform the following instructions in discharging its responsibilities: • Provide insurance coverage as necessary for property, including building and contents, automobile, mobile equipment and data processing equipment, casualty, including general liability, public officials’ and employees’ liability, auto liability and employee benefit liability; workers’ compensation, including employers’ liability; commercial blanket bond; and time element. 60 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued • Assist each participant’s assigned risk manager with the implementation of that function. • Provide loss prevention and safety and consulting services to participants as required. • Provide claims adjusting and subrogation services for claims covered by the association’s joint insurance arrangement. (b) Responsibilities of the Participants The Participants shall have the following responsibilities: • The Borough Assembly or appointing official of each participant shall appoint a representative as provided in Article 5, Section 2 of the bylaws and at least one alternate representative to attend member meetings. • Each participant shall appoint an employee of the participant to be responsible for the risk management function within that entity and to serve as a liaison between the participant and JIA with respect to risk management. • Each participant shall maintain an active safety officer and/or committee, and shall comply with all recommendations of JIA concerning the development and implementation of a loss control policy to prevent unsafe practices. • Each participant shall maintain its own set of records as a loss log, in all categories of loss to insure accuracy of JIA’s loss reporting system. (12) Rental Revenues (a) Hospital Facilities Enterprise Fund The Kodiak Island Borough Assembly leases the Kodiak Island Hospital and Care Center premise and equipment to Sisters of Providence d.b.a. Providence Kodiak Island Medical Center who assumed responsibility for the hospital’s operations as of April 21, 1997. The lease agreement is effective for a term of twenty years from that date. The lease is cancelable by either party with a one year notice. The hospital capital assets, the lease income, and all other costs relating to the agreement are accounted for by the Borough in the Hospital Facilities Enterprise Fund. The agreement with Providence specifies that the Borough will contribute at least $108,000 per year for the purchase of new and replacement equipment for the hospital. The Borough is also required to fund any major maintenance and repairs projects exceeding $25,000 in cost. The Borough receives $60,000 per month in rental revenue. In August, 2003, the lease was amended and required Providence to pay an additional lease payment of $1,300,000 in 2004. In October 2005 the lease was amended to remove the requirement that Providence had to pay 50% of the net revenues of the hospital, up to $600,000, in rental revenues. Providence now has to spend 50% or more of their net profit, up to $200,000, on equipment. The lease was also amended to have the $108,000 of equipment which the Borough was required to purchase annually to become Providence property rather than Borough property. 61 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued (b) Kodiak Fisheries Research Center The Kodiak Fisheries Research Center (KFRC) leases its premise to the General Services Administration (GSA), Alaska Department of Fish and Game (ADF&G), the GSA on behalf of Department of Commerce, National Oceanic and Atmospheric Administration (NOAA), and the University of Alaska Fairbanks (UAF). The lease with the GSA is from March 1, 2003, through September 30, 2018, cancelable with 120 days notice. Annual rent varies from $37,500 to $41,000. Rent was $41,000 in 2012. The lease with ADF&G is from October 1, 1998 through September 30, 2018, with an option to extend for up to two additional five year periods. Annual rent is $52,800. The annual rent from 2012 through 2018 will be adjusted for the tenant’s proportionate share of building expenses and utilization of the seawater system. The lease with NOAA is from October 1, 1998 through September 30, 2018, with an option to extend for up to four additional five year periods. Annual rent is $756,000 plus operational and maintenance expenses of $754,437. Operational and maintenance expenses are adjusted every five years to actual costs. The lease with UAF was originally from October 1, 1998 through September 30, 2018, cancelable with 30 days notice, with an option to extend for up to two additional five year periods. The State of Alaska cancelled the lease for laboratory space effective September 1, 2012, but has continued leasing the dorm space. The State has not given notice to cancel this section of the lease in 2012. (13) Retirement Commitments The Borough has adopted Governmental Accounting Standards Board (GASB) Codification P20, Accounting for Pensions by State and Local Governmental Employees and GASB Codification P50, Accounting and Financial Reporting by Employers for Post-employment Benefits Other than Pensions. GASB Codification P20 and Codification P50 establish uniform standards for the measurement, recognition and display of pension and other post-employment benefits other than pensions (healthcare) expenditures/expense and related liabilities, assets, note disclosure and applicable required supplementary information in the financial reports of state and local governmental employers. Retirement Plans. All full-time employees and certain permanent part-time employees of the Borough participate in the State of Alaska Public Employees’ Retirement System (PERS). In addition to the pension plan the system also administers a post-employment healthcare benefit plan. Summary of Significant Accounting Policies. PERS financial statements are prepared using the accrual basis of accounting. Plan member contributions are recognized in the period in which the contributions are due. The Borough’s contributions are recognized when due and a formal commitment to provide the contributions has been made. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. All plan investments are reported at fair market value or estimated fair market value. 62 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued Termination Costs. If the Borough decides to terminate coverage for a department, group, or other classification of members, even if that termination results from the decision to divest of a particular governmental function, all affected employees in that department, group or other classification of members become immediately vested in the plan. The Borough must pay to have a termination study completed. The purpose of the study is to calculate the Borough’s one-time termination costs. The costs represent the amount necessary to fully fund the costs of plan members who become vested through this process and for other changes in actuarial assumptions, such as, earlier than expected retirement, that arise from the act of termination of coverage. Borough must pay a lump sum within 60 days of termination or arrange a payment plan that is acceptable to the PERS Administrator. Plan Oversight. The Borough contributes to the Alaska Public Employees Retirement System (PERS), which includes both a cost sharing multiple employer defined benefit pension and post- employment healthcare plan and a defined contribution plan. Both plans are administered by the Commissioner of Administration and the Alaska Retirement Management Board (ARMB). Both PERS plans provides retirement benefits including disability and death benefits, and post-employment healthcare to plan members and beneficiaries. The authority to establish and amend benefit provisions is assigned to the ARMB. The Public Employee’s Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for PERS. This report may be obtained from the system at Pouch C, Juneau, Alaska 99811. Alaska Public Employee Retirement System (PERS) – Defined Benefit Plan Plan Description and Funding Agreement. Benefits vest with five years of credited service. Employees enrolled prior to July 1, 1986 with five or more years of credited service are entitled to annual pension benefits beginning at normal retirement age 55 or early retirement age 50. For employees enrolled after June 30, 1986, but before July 1, 2006, the normal and early retirement ages are 60 and 55, respectively. Employees with 30 or more years of credited service may retire at any age and receive a normal benefit. Retirement benefits are calculated by multiplying the average monthly compensation (AMC) times credited PERS service times the percentage multiplier. The AMC is determined by averaging the salaries earned during the five highest (three highest for Police/Fire members or members hired prior to July 1, 1996) consecutive payroll years. Members must earn at least 115 days of credit in the last year worked to include it in the AMC calculation. The PERS pays a minimum benefit of $25 per month for each year of service when the calculated benefit is less. The percentage multipliers for police/fire personnel are 2% for the first ten years of service and 2.5% for all service over 10 years. The percentage multipliers for all other participants are 2% for the first ten years, 2.25% for the next ten years, and 2.5% for all remaining service earned on or after July 1, 1986. All service before that date is calculated at 2%. Post-employment healthcare benefits are provided without cost to all members first enrolled before July 1, 1986. Members first enrolled after June 30, 1986 and who have not reached age 60 may elect to pay for major medical benefits. 63 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued Pension benefits are adjusted each year based upon increases in the Consumer Price Index (CPI) for the prior year. The increase in the benefits is 75% of the CPI increase up to a 9% maximum for recipients who are at least age 65 or on disability or 50% of the increase up to a 6% maximum for recipients who are at least age 60 but under age 65 or who have been receiving benefits for at least five years. Starting at age 65, or at any age for those employed before July 1, 1986, a retired employee who remains in Alaska is eligible for an additional allowance equal to 10% of the base benefit or $50 a month, whichever is greater. Post Retirement Pension Adjustments. Post retirement pension adjustments (PRPAs) are granted annually to eligible benefit recipients when the consumer price index (CPI) increases during the preceding calendar year. PRPAs are calculated by multiplying the recipient’s base benefit, including past PRPAs, times: (a) 75% of the CPI increase in the preceding calendar year or 9%, whichever is less, if the recipient is at least 65 or on PERS disability; or (b) 50% of the CPI increase in the preceding calendar year or 6%, whichever is less, if the recipient is at least 60, or has been receiving benefits for at least five years. Ad hoc PRPAs, up to a maximum of 4%, may be granted to eligible recipients who first entered the PERS before July 1, 1986, if the CPI increases and the financial condition of the fund will permit an increase. In a year where an ad hoc PRPA is granted, eligible recipients will receive the higher of the two calculations. Funding Policy. The Borough PERS active members are required to contribute 6.75% (3.04% pension cost and 3.71% post-employment healthcare costs) of their annual covered salary and the Borough is required to contribute at an actuarial determined rate; the current rate is 33.49% (15.10% pension cost and 18.39% post-employment health care cost). The legislature capped the employer rate at 22%, with the State of Alaska contributing an on behalf payment for the difference between the actuarial required contribution and the cap. On behalf payments by the State of Alaska for the Borough’s employees are recognized as revenues and expenditures/expenses during the year. The contribution requirements of plan members and the Borough are established and may be amended by the ARMB. During the 25th legislation session, Senate Bill 125 passed, which established a June 30, 2008 salary floor under AS 39.35.255(a)(2). The salary floor is the total base salaries paid by an employer to active employees of the system as of the fiscal year ending June 30, 2008. The statute requires the Division of Retirement and Benefits (Division) to collect employer contributions at a minimum based on FY 2008 base salaries. Annual Pension Cost and On-Behalf Payments. The Borough’s annual pension cost for the years ended June 30, 2012, 2011, and 2010 were $572,822, $576,868, and $533,244, respectively, which was equal to the Borough’s actual contributions. For the year ended June 30, 2012 the State of Alaska contributed $341,629 on behalf of the Borough, which was recognized as revenue and expenditures. 64 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued Alaska Public Employee Retirement System (PERS) – Defined Contribution Plan Plan Description and Funding Requirements. Boroughs and Public Employers in the State of Alaska have a defined contribution retirement plan for new hires first enrolled on or after July 1, 2006. Plan members make mandatory contributions of 8% of gross eligible compensation. State statutes require the employer to contribute 5% of employees’ eligible compensation. Additionally, employers are required to contribute 0.51% to the retiree medical plan, 0.20% for occupational and death and disability benefits and 3% of employers average annual employee compensation to the health reimbursement arrangement (HRA). The employer effective contribution rate is 22%. Plan members are 100% vested with their contributions. Members become vested in employers’ contributions as follows: 2 years of service – 25% 3 years of service – 50% 4 years of service – 75% 5 years of service – 100% Plan provisions and contribution requirements and amendments are established by the Alaska Retirement Management Board (ARMB). Total contributions for the year ended June 30, 2012 are as follows: Employer Employee Defined contribution $ 20,032 32,051 Retiree medical plan 2,048 - Occupational death and disability benefits 814 - Health reimbursement agreement (HRA) 14,622 - Defined benefit unfunded liability (DBUL) 50,685 - Actual contributions were equal to the annual required contributions. Deferred Compensation Plan The Kodiak Island Borough has two deferred compensation plans created and amended in accordance with Internal Revenue Code Section 457. The plans are available to all regular Borough employees. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. All amounts deferred under these plans are held in trusts that were established for the exclusive benefit of plan participants. Amounts contributed to the plans by participants during the year ended June 30, 2012, was $139,085. The first plan is managed by the International Borough Managers Association Retirement Corporation. $79,347 was contributed to this plan during the year ended June 30, 2012. The Borough believes that the plan does not meet the criteria for inclusion as a fiduciary fund. The second plan is managed by the Hartford Insurance Company. $59,738 was contributed to this plan during the year ended June 30, 2012. The Borough believes that the plan does not meet the criteria for inclusion as a fiduciary fund. 65 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued (14) Contingencies (a) General The Borough, in the normal course of its activities, is involved in various claims and pending litigation. After consultation with legal counsel, management estimates that these matters will be resolved without material adverse effect on the Borough’s future financial position or results of operations. (b) Grants Amounts received or receivable from grantor agencies are subject to audit and adjustment by the grantor agencies. Any disallowed claims, including amounts already collected, would become a liability of the General or other applicable funds. In management’s opinion, disallowances, if any, will not be material. (15) Subsequent Events Management have evaluated subsequent events through January 28, 2013, the date which the financial statements were available for issue. (16) Prior Period Adjustment In FY2011, management overaccrued accounts receivable and grant revenue in the State Capital Grants Capital Project Fund. This resulted from an error in the calculation of a grant report. A prior period adjustment of $134,499 was posted in the current year to correct this error. (17) Construction Commitments The Borough has outstanding commitments for construction at year end of $736,447. (18) Subsequent Accounting Pronouncements The Governmental Accounting Standards Board has passed several new accounting standards with upcoming implementation dates covering several topics as follows: • GASB 57 – OPEB Measurements by Agent Employers and Agent Multiple- Employer Plans • GASB 60 – Accounting and Financial Reporting for Service Concession Arrangements • GASB 61 – The Financial Reporting Entity: Omnibus an Amendment of GASB Statements No.14 and No. 34 • GASB 62 – Codification of Accounting and Financial Reporting Guidance in Pre- November 30, 1989 FASB and AICPA Pronouncements • GASB 63 – Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position • GASB 64 – Derivative Instruments: Application of Hedge Accounting Termination Provisions – an Amendment of GASB No. 53 66 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued • GASB 65 – Items Previously Reported as Assets and Liabilities • GASB 66 – Technical Correction – 2012 –an Amendment of GASB Statement No. 10 and 62 • GASB 67 – Financial Reporting for Pension Plans – an Amendment of GASB Statements No. 10 and No. 62 • GASB 68 – Accounting and Reporting for Pensions – an Amendment of GASB Statement No.27 Statements 57, 60-62, 66 and 67 are not expected to have any significant impact on the financial statements of the Borough. In June 2011, The GASB issued Statement No. 63, – Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. The requirements of this statement will help improve financial reporting by standardizing the presentation of deferred outflows of resources and deferred inflows of resources and their effects on a government’s net position. It alleviates uncertainty about reporting those financial statement elements by providing guidance where none previously existed. This statement changes the name of the Statement of Net Assets to the Statement of Net Position. The Statement of Net Position will report all assets, deferred outflows of resources, liabilities, deferred inflows of resources and net position. The Net Position will display three components-net investment in capital assets; restricted, with disclosure of major categories of restrictions; and unrestricted. Concepts Statement 4 defined deferred outflows of resources and deferred inflows of resources as “consumption of net assets by the government that is applicable to a future reporting fiscal year, and an acquisition of net assets by the government that is applicable to a future reporting fiscal year”. The Concept Statement 4 defines a net position as “the residual of all other elements presented in a statement of net position”. This statement is effective for financial statements for periods beginning after December 15, 2011. GASB Statement No. 65 establishes accounting and reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. The Statement provides guidance related to the impact of the financial statement elements deferred outflows of resources and deferred inflow of resources, such as changes in the determination of major fund calculations and limiting the use of the term deferred in financial statement presentations. GASB Statement No. 65 is effective for period beginning after December 15, 2012. 67 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued GASB Statement No. 68’s objective is to improve accounting and reporting for pensions. This Statement establishes standards for measuring and recognizing liabilities, deferred outflows of resources, deferred inflows of resources, and expense/expenditures. This Statement establishes methods and assumptions used to project benefit payments to their actuarial present value and attribute that present value to the periods of employee service. Note disclosures and required supplementary information are addressed in this Statement. This Statement is effective for fiscal years beginning after June 15, 2014. 68 Required Supplementary Information 69 KODIAK ISLAND BOROUGH Budgetary Comparison Schedule General Fund Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) Variance with Final Budget – Budget Positive 2011 Original Final Actual (Negative)Actual Revenues: Property taxes and assessments: Real $28,666 29,366 39,166 9,800 9,193,188 Personal 2,944 18,244 97,280 79,036 1,078,469 Boat 25,140 24,440 23,481 (959) 40,747 Motor vehicle 15,300 — — — 263,466 Penalty and interest 150,000 150,000 161,433 11,433 187,687 Total property taxes and assessments 222,050 222,050 321,360 99,310 10,763,557 Severance taxes:Fish 1,397,500 1,437,500 1,892,755 455,255 1,583,276 Mining 21,500 21,500 2,634 (18,866) 6,865 Logging 93,581 93,581 74,876 (18,705) 59,134 Total severance taxes 1,512,581 1,552,581 1,970,265 417,684 1,649,275 Intergovernmental: State sources: State Revenue Sharing 955,015 955,015 985,108 30,093 732,242 Raw fish tax 1,200,000 1,338,000 1,405,360 67,360 1,026,385 Fish revitalization 50,000 50,000 101,364 51,364 88,859 Commercial Passenger Vessel Tax 25,000 25,000 32,622 7,622 15,762 Electric Co-op tax 26,000 26,000 26,387 387 26,952 On behalf PERS payment 120,000 120,000 225,681 105,681 216,642 Liquor license — — 12 12 — Total state sources 2,376,015 2,514,015 2,776,534 262,519 2,106,842 Federal sources: Payments in lieu of taxes 1,348,000 1,348,000 1,460,645 112,645 1,359,938 Fish and Wildlife revenue sharing 252,000 252,000 188,268 (63,732) 173,767 Schools and Roads - Grants to States — — — — 1,462 Total federal sources 1,600,000 1,600,000 1,648,913 48,913 1,535,167 Total intergovernmental revenue 3,976,015 4,114,015 4,425,447 311,432 3,642,009 Charges for services - Sale of copies and maps 2,600 2,600 1,011 (1,589) 2,227 Licenses, permits and fees: Building and trailer permits 60,000 60,000 40,062 (19,938) 39,680 Subdivision and zoning fees 17,250 17,250 19,472 2,222 22,926 Other permits 8,000 8,000 5,887 (2,113) 9,788 Total licenses, permits and fees 85,250 85,250 65,421 (19,829) 72,394 Investment income 125,000 125,000 281,792 156,792 (21,628) Other 8,125 8,125 15,166 7,041 535,008 Total revenues 5,931,621 6,109,621 7,080,462 970,841 16,642,842 (continued) 2012 70 KODIAK ISLAND BOROUGH Budgetary Comparison Schedule General Fund, continued Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) Variance with Actual Amounts Final Budget – Budget Budgetary Basis Positive 2011 Original Final (see Note A)(Negative)Actual Expenditures:General government: General and administration $224,122 249,122 246,484 2,638 276,693 Borough assembly 175,900 175,900 156,215 19,685 179,091 Borough manager 448,573 468,573 465,521 3,052 412,347 Borough clerk 517,404 525,404 530,067 (4,663) 497,520 Borough attorney 129,000 129,000 115,751 13,249 146,265 Finance department 841,400 841,400 812,818 28,582 770,669 Management information systems 830,355 830,355 664,901 165,454 776,475 Assessing department 613,038 613,038 520,933 92,105 554,212 Engineering/facilities department 257,789 257,789 243,018 14,771 182,264 Total general government 4,037,581 4,090,581 3,755,708 334,873 3,795,536 Public safety - animal control — — — — 84,125 Community and economic development: Community development department 716,310 706,310 705,969 341 681,077 Building official 131,539 206,539 161,117 45,422 108,530 Economic development 95,600 135,600 110,401 25,199 63,593 Total community and economic development 943,449 1,048,449 977,487 70,962 853,200 Emergency preparedness 37,000 37,000 18,923 18,077 11,705 Health and sanitation department 286,315 286,315 286,300 15 286,315 Education, culture, and recreation 96,685 96,685 64,289 32,396 85,690 Parks and recreation 35,000 20,000 5,825 14,175 13,625 Kodiak College and city libraries 87,000 87,000 87,000 — 87,000 Primary and secondary education 331,871 — — — 10,040,350 Total expenditures 5,854,901 5,666,030 5,195,532 470,498 15,257,546 Excess of revenues over expenditures 76,720 443,591 1,884,930 1,441,339 1,385,296 Other financing (uses): Transfers out (76,720) (443,591) (443,591) — (1,551,500) Change in fund balance $— — 1,441,339 1,441,339 (166,204) Fund balance, at beginning of year 2,316,186 2,482,390 Fund balance, at end of the year $3,757,525 2,316,186 Note A: This schedule does not include expenditures of $143,840 and a beginning deficit of $356,628 on a multi year community development project. These costs are accumulated in the Community Development Fund which is combined with the General Fund for the Basic Financial Statements. This schedule includes a transfer to Community Development Fund in the amount of $35,000, which is not presented on the Statement of Revenues, Expenditures, and Changes in Fund Balances (Deficits) on page 25. Note B:See accompanying notes to required supplementary information. 2012 71 KODIAK ISLAND BOROUGH Budgetary Comparison Schedule Special Revenue Fund – Education Support Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) Variance with Final Budget – Budget Positive 2011 Original Final Actual (Negative)Actual Revenues: Property taxes and assessments: Real $8,685,795 8,685,795 8,589,995 (95,800) — Personal 892,084 892,084 870,582 (21,502) — Motor vehicle 250,000 250,000 286,632 36,632 — Total property taxes and assessments 9,827,879 9,827,879 9,747,209 (80,670) — Expenditures: Primary and secondary education 10,250,350 10,250,350 10,250,349 1 — Excess (deficiency) of revenues over (under) expenditures (422,471) (422,471) (503,140) (80,669) — Other financing sources: Transfers in 422,471 422,471 431,871 9,400 — Change in fund balance $— — (71,269) (71,269) — Fund balance, at beginning of year — — Fund balance (deficit), at end of year $(71,269) — See accompanying notes to required supplementary information. 2012 72 KODIAK ISLAND BOROUGH Budgetary Comparison Schedule Special Revenue Fund – Facilities Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) Variance with Final Budget – Budget Positive 2011 Original Final Actual (Negative)Actual Revenues: Investment income $700,000 700,000 1,172,584 472,584 651,417 Expenditures — — — — — Excess of revenues over expenditures 700,000 700,000 1,172,584 472,584 651,417 Other financing sources (uses): Transfers out (840,000) (840,000) (562,561) 277,439 (760,933) Change in fund balance $(140,000) (140,000) 610,023 750,023 (109,516) Fund balance, at beginning of year 39,255,683 39,365,199 Fund balance, at end of year $39,865,706 39,255,683 See accompanying notes to required supplementary information. 2012 KODIAK ISLAND BOROUGH Notes to Required Supplementary Information – Budgetary Comparison Schedules June 30, 2012 The Borough follows these procedures in establishing the budgetary data reflected in the fund financial statements: • The Borough Manager must submit to the Borough Assembly by April 30 a proposed operating budget for the fiscal year commencing the following July 1. The operating budget includes proposed expenditures and the means of financing them. • Public hearings are conducted by the Borough Assembly to obtain citizen comments. • By June 10, the budget is legally enacted through passage of an ordinance by Borough Assembly action. If the Borough Assembly fails to pass an ordinance, the budget submitted by the Borough Manager becomes the adopted budget. • Amendments to the budget can occur anytime during the fiscal year through the Borough Assembly or administrative action. Generally, the following actions are required at the level of the particular change: – All new appropriations are authorized by an appropriation ordinance that amends the annual budget ordinance. – A resolution of the Borough Assembly is required to move (appropriate) amounts between departments and projects. – The administration is authorized and directed by the Borough Assembly to effect the necessary line item changes within the limits established by Items (1) and (2) above by project or department to properly monitor, account, and report receipts and expenditures. • Expenditures may not legally exceed appropriations at the following levels: Capital Projects Funds – project level, all other funds – department level. • All funds, except Capital Projects Funds, are budgeted on an annual basis encompassing a fiscal year. Budgets of Capital Projects Funds generally encompass the period from start-up to project completion, which is generally greater than one year. • Appropriations lapse at year end to the extent that they have not been expended for all funds, except Capital Projects Funds, which lapse at project completion. • Budgets adopted by the Borough Assembly are in accordance with accounting principles generally accepted in the United States of America. • The Borough published a separate 2012 budget document. That document may be obtained from the Kodiak Island Borough, Director of Finance, 710 Mill Bay Road, Kodiak, Alaska 99615. 73 ADDITIONAL SUPPLEMENTARY INFORMATION NONMAJOR GOVERNMENTAL FUNDS Special Revenue See Special Revenue section of this report. Capital Projects See Capital Projects section of this report. NONMAJOR SPECIAL REVENUE FUNDS The Fire Protection Area No. 1 Fund accounts for the activities related to fire suppression and fire prevention services to the citizens of the service area. The Womens Bay Fire Department Fund accounts for the activities related to fire suppression and fire prevention services to the citizens of the service area. The Kodiak Airport Fire District Fund accounts for the activities related to fire suppression and fire prevention services to the citizens of the service area. The Monashka Bay Road Service Area Fund accounts for the activities related to road services within the service area. The Service Area No. 1 Fund accounts for the activities related to maintenance service to roads within the district, including snow removal, ditching and grading. The Womens Bay Road Service Area Fund accounts for the activities related to maintenance service to roads within the service area, including snow and ice removal, ditching and culvert work. The Bay View Road Service Area Fund accounts for the activities related to road services within the service area. The Service Area No. 2 Fund accounts for the activities related to water and sewer services in the service area. This fund is in the design stage at present. The Coastal Management Fund accounts for State of Alaska and Federal grants related to the effects of coastal energy development impacts. Expenditures of these grants are for comprehensive plans, coastal sensitivity analysis, outer continental shelf impact analysis, ordinance update, and planning and zoning. The Child Care Assistance Program Fund accounts for a State of Alaska grant to finance day care for children of low-income employed families. The Local Emergency Planning Committee (L.E.P.C.) Fund accounts for State of Alaska grants provided for regional emergency preparation, response, and mitigation planning. The Land Sales Fund accounts for the disposal of Borough-owned lands. The proceeds of land disposals are generally used for the management of Borough lands and the repairs and maintenance of Borough school buildings. The Buildings and Grounds Fund accounts for the operations and maintenance of certain buildings and grounds owned by the Borough which are jointly shared with the City of Kodiak, the Kodiak Island Borough School District, and certain nonprofit community organizations. The Woodland Acres Street Light Service Area Fund accounts for activities related to the provision of street lighting within the service area. The Trinity Islands Street Light Service Area Fund accounts for activities related to the provision of street lighting within the service area. (continued) NONMAJOR SPECIAL REVENUE FUNDS The Tourism Development Fund accounts for the collection of the Borough Transient Accommodation Tax (Bed Tax) and its subsequent transfer to the Kodiak Island Convention and Visitor Bureau. The Mission Lake Tide Gate Fund accounts for activities related to maintaining the tide gate for the residents of the service area. The Fern Fuller Trust Fund accounts for the distribution of funds to the beneficiaries of the trust. The Trinity Islands Paving Fund accounts for activities related to the provision of paving within the service area. 74 KODIAK ISLAND BOROUGH Budgetary Comparison Schedule Debt Service Fund - Education and Health Year ended June 30, 2012 (With summarized financial information for the year ended June 30, 2011) Variance with Original Final Budget – and Final Positive 2011 Budget Actual (Negative)Actual Revenues: Property taxes and assessments $1,633,190 1,613,194 (19,996) — Intergovernmental: State sources 2,265,000 2,088,739 (176,261) 2,148,393 Investment income — 6,628 6,628 (7,751) Total revenues 3,898,190 3,708,561 (189,629) 2,140,642 Expenditures: General government 9,804 13,994 (4,190) 21,959 Debt service: Principal 2,775,005 2,780,776 (5,771) 2,750,690 Interest 1,514,846 2,691,426 (1,176,580) 1,287,422 Debt issuance — 100,149 (100,149) — Total expenditures 4,299,655 5,586,345 (1,286,690) 4,060,071 Excess (deficiency) of revenues over (under) expenditures (401,465) (1,877,784) (1,476,319) (1,919,429) Other financing sources (uses): Refunding bonds issued — 11,615,000 11,615,000 — Premium on refunded bonds issued — 1,963,039 1,963,039 — Payment to refunded bond escrow agent — (12,180,000) (12,180,000) — Transfers in 400,000 276,852 (123,148) 1,902,500 Net other financing sources (uses)400,000 1,674,891 1,274,891 1,902,500 Change in fund balance $(1,465) (202,893) (201,428) (16,929) Fund balance, at beginning of year 5,326 22,255 Fund balance (deficit), at end of year $(197,567) 5,326 2012 75 KODIAK ISLAND BOROUGH Combining Balance Sheet Nonmajor Governmental Funds June 30, 2012 (With summarized financial information at June 30, 2011) Special Capital Revenue Project Assets Funds Funds 2012 2011 Equity in central treasury $2,722,294 7,994,704 10,716,998 10,661,270 Receivables: State of Alaska 17,464 35,674 53,138 98,559 Federal government — 46,522 46,522 251,230 Property taxes 17,498 — 17,498 9,777 Land sales contracts, due within one year 9,553 — 9,553 12,671 Other 25,938 30,556 56,494 53,579 Prepaid items 709 879 1,588 879 Due from other funds — — — 2 Land sale contracts, due after one year 15,509 — 15,509 21,704 Total $2,808,965 8,108,335 10,917,300 11,109,671 Liabilities and Fund Balances Liabilities: Accounts payable $163,837 44,953 208,790 842,790 Customer deposits 2,250 — 2,250 150 Due to other funds 268,039 — 268,039 957,219 Deferred revenues 15,509 89,716 105,225 43,568 Total liabilities 449,635 134,669 584,304 1,843,727 Fund Balances: Nonspendable 16,218 879 17,097 21,704 Committed 2,520,609 — 2,520,609 10,423,372 Assigned — 7,972,787 7,972,787 — Unassigned (177,497) — (177,497) (1,179,132) Total fund balances 2,359,330 7,973,666 10,332,996 9,265,944 Total $2,808,965 8,108,335 10,917,300 11,109,671 Totals 76 KODIAK ISLAND BOROUGH Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds Year ended June 30, 2012 (With summarized financial information for year ended June 30, 2011) Special Capital Revenue Project Funds Funds 2012 2011 Revenues: Property taxes and assessments $1,287,594 — 1,287,594 1,146,249 Transient accomodations tax 87,400 — 87,400 96,384 Intergovernmental: State sources 63,795 91,006 154,801 107,352 Federal sources 101,048 190,415 291,463 380,134 Charges for services 612,914 — 612,914 612,518 Licenses, permits and fees 5,351 — 5,351 32,679 Investment income 76,037 152,813 228,850 69,120 Other 29,138 — 29,138 92,759 Total revenues 2,263,277 434,234 2,697,511 2,537,195 Expenditures: Current: General government 883,063 196,040 1,079,103 1,000,792 Public safety 447,479 — 447,479 453,498 Community and economic development 73,910 — 73,910 101,075 Health and sanitation department 105,696 — 105,696 105,696 Service district maintenance 705,665 — 705,665 593,388 Capital outlay:— Schools — 410,639 410,639 1,074,914 General — 348,949 348,949 1,913,447 Debt service - interest 4,231 — 4,231 5,223 Total expenditures 2,220,044 955,628 3,175,672 5,248,033 Excess (deficiency) of revenues over (under) expenditures 43,233 (521,394) (478,161) (2,710,838) Other financing sources (uses): Land sales proceeds 10,735 — 10,735 15,021 Transfers in 40,000 145,709 185,709 1,879,789 Transfers out (66,500) — (66,500) (1,549,856) Net other financing sources (uses)(15,765) 145,709 129,944 344,954 Change in fund balances 27,468 (375,685) (348,217) (2,365,884) Fund balances, at beginning of year as previously stated 2,331,862 8,483,850 10,815,712 11,631,828 Prior period adjustment — (134,499) (134,499) — Fund balances, at beginning of year, as restated 2,331,862 8,349,351 10,681,213 11,631,828 Fund balances, at end of year $2,359,330 7,973,666 10,332,996 9,265,944 Totals 77 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Combining Balance Sheet June 30, 2012 (With summarized financial information at June 30, 2011) Fire and Road Service Areas Fire Road Fire Womens Kodiak MonashkaProtectionBay Fire Airport Fire Bay Road Service Assets Area No. 1 Department District Service Area Area No. 1 Equity in central treasury $59,062 395,215 35,422 31,949 502,379 Receivables: State of Alaska — — — — — Property taxes 7,425 1,119 593 931 4,894 Land sales contracts, due within one year — — — — — Other — 550 — — — Prepaid expenses 233 84 — — — Due from other funds — — — — — Land sale contracts, due after one year — — — — — Total $66,720 396,968 36,015 32,880 507,273 Liabilities and Fund Balances (Deficits) Liabilities: Accounts payable 21,499 1,199 — 8,100 19,732 Customer deposits — 1,100 — — — Due to other funds 150,000 — — — — Deferred revenues — — — — — Total liabilities 171,499 2,299 — 8,100 19,732 Fund balances (deficits): Nonspendable 233 84 — — — Committed — 394,585 36,015 24,780 487,541 Unassigned (105,012) — — — — Total fund balances (deficits)(104,779) 394,669 36,015 24,780 487,541 Total $66,720 396,968 36,015 32,880 507,273 78 Fire and Road Service Areas Womens Child CareBay Road Bay View Road Service Area Coastal Assistance Service Area Service Area No. 2 Management Program L.E.P.C. 22,536 9 5,706 27,133 12,013 37 — — — — 10,921 6,543 2,237 297 — — — — — — — — — — — — — — — — — — — — 392 — — — — — — — — — — — — — 24,773 306 5,706 27,133 23,326 6,580 38,919 — — — 8,124 1,342 — — — — — — — 11,000 — — 13,000 22,000 — — — — — — 38,919 11,000 — — 21,124 23,342 — — — — 392 — — — 5,706 27,133 — — (14,146) (10,694) — — 1,810 (16,762) (14,146) (10,694) 5,706 27,133 2,202 (16,762) 24,773 306 5,706 27,133 23,326 6,580 (continued) Road Federal and State Grant Programs 79 Woodland Buildings Acres Street Trinity IslandsandLight Service Street Light Tourism Assets Land Sales Grounds Area Service Area Development Equity in central treasury $753,980 270,034 8,592 14,635 124,844 Receivables: State of Alaska — — — — — Property taxes — — 2 — — Land sales contracts, due within one year 9,553 — — — — Other 2,527 3,587 — — 19,274 Prepaid expenses — — — — — Due from other funds — — — — — Land sale contracts, due after one year 15,509 — — — — Total $781,569 273,621 8,594 14,635 144,118 Liabilities and Fund Balances (Deficits) Liabilities: Accounts payable 9,515 39,798 452 157 15,000 Customer deposits 1,000 — — — 150 Due to other funds — — — — — Deferred revenues 15,509 — — — — Total liabilities 26,024 39,798 452 157 15,150 Fund balances (deficits): Nonspendable 15,509 — — — — Committed 740,036 233,823 8,142 14,478 128,968 Unassigned — — — — — Total fund balances (deficits)755,545 233,823 8,142 14,478 128,968 Total $781,569 273,621 8,594 14,635 144,118 Street Lighting Districts (With summarized financial information at June 30, 2011) KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Combining Balance Sheet, (continued) June 30, 2012 80 Mission Lake Fern Fuller Trinity Islands Totals Tide Gate Trust Paving 2012 2011 26,601 392,801 39,346 2,722,294 2,952,695 — — — 17,464 14,166 — — — 17,498 9,777 — — — 9,553 12,671 — — — 25,938 22,764 — — — 709 — — — — — 2 — — — 15,509 21,704 26,601 392,801 39,346 2,808,965 3,033,779 — — — 163,837 227,442 — — — 2,250 150 — — 72,039 268,039 451,027 — — — 15,509 23,298 — — 72,039 449,635 701,917 — — — 16,218 21,704 26,601 392,801 — 2,520,609 2,685,022 — — (32,693) (177,497) (374,864) 26,601 392,801 (32,693) 2,359,330 2,331,862 26,601 392,801 39,346 2,808,965 3,033,779 81 Fire Fire Womens Kodiak Monashka Protection Bay Fire Airport Fire Bay Road Service Area No. 1 Department District Service Area Area No. 1 Revenues: Property taxes and assessments $525,568 93,072 11,694 61,040 364,861 Transient accomodations tax — — — — — Intergovernmental: State sources 10,938 — — — — Federal sources — — — — — Charges for services — 11,646 — — — Licenses, permits and fees — — — — — Investment income 1,003 8,635 1,031 599 13,986 Other 16,167 12,835 — — — Total revenues 553,676 126,188 12,725 61,639 378,847 Expenditures: Current: General government — — — — — Public safety 354,383 62,406 11,672 — — Community and economic development — — — — — Health and sanitation department — — — — — Service district maintenance — — — 40,245 325,010 Debt service - interest — — — — — Total expenditures 354,383 62,406 11,672 40,245 325,010 Excess (deficiency) of revenues over (under) expenditures 199,293 63,782 1,053 21,394 53,837 Other financing sources (uses): Land sale proceeds — — — — — Transfers in — — — — — Transfers out — — — — — Net other financing sources (uses)— — — — — Change in fund balances 199,293 63,782 1,053 21,394 53,837 Fund balances (deficits), at beginning of year (304,072) 330,887 34,962 3,386 433,704 Fund balances (deficits), at end of year $(104,779) 394,669 36,015 24,780 487,541 Fire and Road Service Areas Road KODIAK ISLAND BOROUGH Year ended June 30, 2012 (With summarized financial information for the year ended June 30, 2012) Nonmajor Special Revenue Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (Deficits) 82 Womens Child Care Bay Road Bay View Road Service Coastal Assistance Service Area Service Area Area No. 2 Management Program L.E.P.C. 178,869 12,828 — — — — — — — — — — — — — — 7,581 19,018 — — — — 101,048 — — — — — — — 1 — — — — — 8,298 — 140 — — — — — — — — — 187,168 12,828 140 — 108,629 19,018 — — — — — — — — — — — 19,018 — — — — — — — — — — 105,696 — 322,505 17,815 — — — — — — — — — — 322,505 17,815 — — 105,696 19,018 (135,337) (4,987) 140 — 2,933 — — — — — — — — — — — — — — — — — — — — — — — — — (135,337) (4,987) 140 — 2,933 — 121,191 (5,707) 5,566 27,133 (731) (16,762) (14,146) (10,694) 5,706 27,133 2,202 (16,762) (continued) Fire and Road Service Areas Road Federal and State Grant Programs 83 Woodland Acres Trinity Islands Buildings and Street Light Street Light Land Sales Grounds Service Area Service Area Revenues: Property taxes and assessments $— — 11,574 5,268 Transient accomodations tax — — — — Intergovernmental: State sources 11,328 14,930 — — Federal sources — — — — Charges for services 39,733 561,535 — — Licenses, permits and fees 5,350 — — — Investment income 22,322 3,241 506 315 Other 135 1 — — Total revenues 78,868 579,707 12,080 5,583 Expenditures: Current: General government 283,762 575,494 21,876 1,931 Public safety — — — — Community and economic development — — — — Health and sanitation department — — — — Service district maintenance — — — — Debt service - interest — — — — Total expenditures 283,762 575,494 21,876 1,931 Excess (deficiency) of revenues over (under) expenditures (204,894) 4,213 (9,796) 3,652 Other financing sources (uses): Land sales proceeds 10,735 — — — Transfers in — 40,000 — — Transfers out — — — — Net other financing sources (uses)10,735 40,000 — — Change in fund balances (194,159) 44,213 (9,796) 3,652 Fund balances (deficits), at beginning of year 949,704 189,610 17,938 10,826 Fund balances (deficits), at end of year $755,545 233,823 8,142 14,478 KODIAK ISLAND BOROUGH Street Lighting Districts Combining Statement of Revenues, Expenditures, (With summarized financial information for the year ended June 30, 2011) Nonmajor Special Revenue Funds and Changes in Fund Balances (Deficits), (continued) Year ended June 30, 2012 84 Tourism Mission Lake Fern Fuller Trinity Islands Totals Development Tide Gate Trust Paving 2012 2011 — 4,844 — 17,976 1,287,594 1,146,249 87,400 — — — 87,400 96,384 — — — — 63,795 22,298 — — — — 101,048 124,970 — — — — 612,914 612,518 — — — — 5,351 32,679 3,400 600 10,777 1,184 76,037 31,011 — — — — 29,138 1,927 90,800 5,444 10,777 19,160 2,263,277 2,068,036 — — — — 883,063 1,000,792 — — — — 447,479 453,498 73,910 — — — 73,910 101,075 — — — — 105,696 105,696 — 60 — 30 705,665 593,388 — — — 4,231 4,231 5,223 73,910 60 — 4,261 2,220,044 2,259,672 16,890 5,384 10,777 14,899 43,233 (191,636) — — — — 10,735 15,021 — — — — 40,000 166,247 — — (66,500) — (66,500) (1,549,856) — — (66,500) — (15,765) (1,368,588) 16,890 5,384 (55,723) 14,899 27,468 (1,560,224) 112,078 21,217 448,524 (47,592) 2,331,862 3,892,086 128,968 26,601 392,801 (32,693) 2,359,330 2,331,862 85 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Fire and Road Service Areas – Fire Protection Area No. 1 Schedule of Revenues, Expenditures, and Changes in Fund Balance (Deficit) Budget and Actual Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) Variance with Final Budget Final Positive 2011 Budget Actual (Negative)Actual Revenues: Property taxes and assessments $509,000 525,568 16,568 484,639 Intergovernmental: State sources - PERS on behalf payment — 10,938 10,938 — Investment income 3,010 1,003 (2,007) 8,793 Other 8,200 16,167 7,967 18,505 Total revenues 520,210 553,676 33,466 511,937 Expenditures: Public safety: Personnel 90,870 92,106 (1,236) 83,914 Volunteers 15,000 20,895 (5,895) 14,820 Fringe benefits 49,120 56,728 (7,608) 43,213 Professional services 2,500 1,020 1,480 83 Support goods and services 177,250 183,634 (6,384) 175,475 Capital outlay 185,470 — 185,470 17,253 Total expenditures 520,210 354,383 165,827 334,758 Excess of revenues over expenditures — 199,293 199,293 177,179 Other financing sources (uses): Transfers out: Borough Capital Projects — — — (1,469,609) Change in fund balance $— 199,293 199,293 (1,292,430) Fund balance (deficit), at beginning of year (304,072) 988,358 Fund (deficit), at end of year $(104,779) (304,072) 2012 86 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Fire and Road Service Areas – Womens Bay Fire Department Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) Variance with Final Budget Final Positive 2011 Budget Actual (Negative)Actual Revenues: Property taxes and assessments $89,500 93,072 3,572 69,772 Intergovernmental: State sources - grants — — — 4,144 Charges for services 12,000 11,646 (354) 12,626 Licenses, permits and fees — — — 4,329 Investment income 2,000 8,635 6,635 2,553 Other 12,000 12,835 835 — Total revenues 115,500 126,188 10,688 93,424 Expenditures: Public safety: Personnel services 1,000 24 976 443 Fringe benefits 500 7 493 319 Professional services 10,000 — 10,000 13,790 Support goods and services 86,000 53,016 32,984 84,055 Capital outlay 84,000 9,359 74,641 — Total expenditures 181,500 62,406 119,094 98,607 Excess (deficiency) of revenues over (under) expenditures (66,000) 63,782 129,782 (5,183) Other financing sources: Transfers in: Kodiak Airport Fire District Special Revenue Fund 1,000 — (1,000) 13,747 Change in fund balance $(65,000) 63,782 128,782 8,564 Fund balance, at beginning of year 330,887 322,323 Fund balance, at end of year $394,669 330,887 2012 87 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Fire and Road Service Areas – Kodiak Airport Fire District Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) 2012 Variance with Final Budget Final Positive 2011 Budget Actual (Negative)Actual Revenues: Property taxes and assessments $13,840 11,694 (2,146) 14,361 Investment income 30 1,031 1,001 236 Total revenues 13,870 12,725 (1,145) 14,597 Expenditures: Public safety: Support goods and services 13,870 11,672 2,198 18 Excess of revenues over expenditures — 1,053 1,053 14,579 Other financing sources (uses): Transfer out — — — (13,747) Change in fund balance $— 1,053 1,053 832 Fund balance, at beginning of year 34,962 34,130 Fund balance, at end of year $36,015 34,962 88 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Fire and Road Service Areas – Monashka Bay Road Service Area Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) 2012 Variance with Final Budget Final Positive 2011 Budget Actual (Negative)Actual Revenues: Property taxes and assessments $50,850 61,040 10,190 52,842 Investment income — 599 599 58 Total revenues 50,850 61,639 10,789 52,900 Expenditures: Service district maintenance: Personnel services 500 253 247 391 Fringe benefits — 152 (152) 194 Support goods and services 4,350 100 4,250 354 Snow removal/sanding 18,000 29,645 (11,645) 17,158 Road grading/ditching 3,000 10,095 (7,095) 1,738 Repairs and maintenance 25,000 — 25,000 34,054 Total expenditures 50,850 40,245 10,605 53,889 Excess (deficiency) of revenues over (under) expenditures $— 21,394 21,394 (989) Fund balance, at beginning of year 3,386 4,375 Fund balance, at end of year $24,780 3,386 89 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Fire and Road Service Areas – Service Area No. 1 Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2012 (With financial information for the year ended June 30, 2012) 2012 Variance with Final Budget Final Positive 2011 Budget Actual (Negative)Actual Revenues: Property taxes and assessments $349,500 364,861 15,361 340,589 Investment income — 13,986 13,986 3,903 Total revenues 349,500 378,847 29,347 344,492 Expenditures: Service district maintenance: Personnel services 7,600 6,793 807 5,206 Fringe benefits 1,950 2,115 (165) 1,338 Support goods and services 1,550 1,083 467 909 Snow removal/sanding 170,000 270,228 (100,228) 160,889 Road grading/ditching 70,000 29,839 40,161 34,116 Repairs and maintenance 98,400 14,952 83,448 153,252 Total expenditures 349,500 325,010 24,490 355,710 Excess (deficiency) of revenues over (under) expenditures $— 53,837 53,837 (11,218) Fund balance, at beginning of year 433,704 444,922 Fund balance, at end of year $487,541 433,704 90 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Fire and Road Service Areas – Womens Bay Road Service Area Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2012 (With financial information for the year ended June 30, 2012) 2012 Variance with Final Budget Final Positive 2011 Budget Actual (Negative)Actual Revenues: Property taxes and assessments $194,000 178,869 (15,131) 134,332 Licenses, permits and fees 25,000 1 (24,999) 27,600 Investment income 1,000 8,298 7,298 800 Total revenues 220,000 187,168 (32,832) 162,732 Expenditures: Service district maintenance: Personnel services 1,200 942 258 1,350 Fringe benefits 800 262 538 905 Contracted services — 350 Support goods and services 81,000 61 80,939 302 Snow removal/sanding 47,000 168,137 (121,137) 64,965 Road grading/ditching 35,000 63,838 (28,838) 22,475 Repairs and maintenance 55,000 88,915 (33,915) 85,551 Total expenditures 220,000 322,505 (102,505) 175,548 Excess (deficiency) of revenues over (under) expenditures $— (135,337) (135,337) (12,816) Fund balance, at beginning of year 121,191 134,007 Fund balance (deficit), at end of year $(14,146) 121,191 91 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Fire and Road Service Areas – Bay View Road Service Area Schedule of Revenues, Expenditures, and Changes in Fund (Deficit) Budget and Actual Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) 2012 Variance with Final Budget Final Positive 2011 Budget Actual (Negative)Actual Revenues: Property taxes and assessments $11,265 12,828 1,563 10,830 Investment income — — — (11) Total revenues 11,265 12,828 1,563 10,819 Expenditures: Service district maintenance: Personnel services — 163 (163) 168 Fringe benefits — 100 (100) 107 Professional services 5,565 — 5,565 — Support goods and services 100 22 78 15 Snow removal/sanding 3,000 14,483 (11,483) 7,345 Road grading/ditching 1,100 3,047 (1,947) 585 Repairs and maintenance 1,500 — 1,500 — Total expenditures 11,265 17,815 (6,550) 8,220 Excess (deficiency) of revenues over (under) expenditures $— (4,987) (4,987) 2,599 Fund (deficit), at beginning of year (5,707) (8,306) Fund (deficit), at end of year $(10,694) (5,707) 92 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Fire and Road Service Areas – Service Area No. 2 Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2012 (With financial information for the year ended June 30, 2012) 2012 Variance with Final Budget Final Positive 2011 Budget Actual (Negative)Actual Revenues: Investment income $100 140 40 45 Expenditures Service district maintenance - Support services — — — — Excess of revenues over expenditures $100 140 40 45 Fund balance, at beginning of year 5,566 5,521 Fund balance, at end of year $5,706 5,566 93 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Coastal Management Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) 2012 Variance withFinal Budget Final Positive 2011 Budget Actual (Negative)Actual Revenues: Intergovernmental:Federal sources – grants $— — — 19,274 Expenditures: Community and economic development: Planning and zoning — — — 26,099 Excess (deficiency) of revenues over (under) expenditures $— — — (6,825) Fund balance, at beginning of year 27,133 33,958 Fund balance, at end of year $27,133 27,133 94 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Child Care Assistance Program Schedule of Revenues, Expenditures, and Changes in Fund Balance (Deficit) Budget and Actual Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) 2012 Variance with Final Budget Final Positive 2011 Budget Actual (Negative)Actual Revenues: Intergovernmental: State sources: Grants $4,648 4,648 — — PERS on behalf payment — 2,933 2,933 — Federal sources – grants 101,048 101,048 — 105,696 Total revenues 105,696 108,629 2,933 105,696 Expenditures: Health and sanitation department: Personnel 64,395 61,343 3,052 56,835 Fringe benefits 40,340 27,648 12,692 31,069 Support goods and services 22,400 16,705 5,695 17,792 Total expenditures 127,135 105,696 21,439 105,696 Excess of revenues over expenditures $(21,439) 2,933 24,372 — Fund (deficit), at beginning of year (731) (731) Fund balance, at end of year $2,202 (731) 95 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds L.E.P.C. Schedule of Revenues, Expenditures, and Changes in Fund (Deficit) Budget and Actual Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) 2012 Variance with Final Budget Final Positive 2011 Budget Actual (Negative)Actual Revenues: Intergovernmental:State sources – grants $19,018 19,018 — 18,154 Expenditures: Public safety: Personnel services 5,288 12,336 (7,048) 12,543 Fringe benefits 3,751 6,083 (2,332) 6,531 Support goods and services 9,979 599 9,380 1,041 Total expenditures 19,018 19,018 — 20,115 Excess (deficiency) of revenues over (under) expenditures $— — — (1,961) Fund (deficit), at beginning of year (16,762) (14,801) Fund (deficit), at end of year $(16,762) (16,762) 96 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Land Sales Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) 2012 Variance with Final Budget Final Positive 2011 Budget Actual (Negative)Actual Revenues: Intergovernmental: State sources - PERS on behalf payment — 11,328 11,328 — Charges for services 50,000 39,733 (10,267) 2,105 Licenses, permits and fees 1,000 5,350 4,350 750 Investment income 5,000 22,322 17,322 8,318 Other — 135 135 80 Total revenues 56,000 78,868 22,868 11,253 Expenditures: General government: Personnel services 193,670 181,190 12,480 103,352 Fringe benefits 76,430 72,588 3,842 60,071 Professional services — — — 2,175 Support goods and services 38,245 29,984 8,261 48,767 Total expenditures 308,345 283,762 24,583 214,365 Excess (deficiency) of revenues over (under) expenditures (252,345) (204,894) 47,451 (203,112) Other financing sources: Land sale proceeds 25,000 10,735 (14,265) 15,021 Change in fund balances $(227,345) (194,159) 33,186 (188,091) Fund balance, at beginning of year 949,704 1,137,795 Fund balance, at end of year $755,545 949,704 97 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Buildings and Grounds Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) 2012 Variance with Final Budget Final Positive 2011 Budget Actual (Negative)Actual Revenues: Intergovernmental: State sources - PERS on behalf payment $— 14,930 14,930 — Charges for services 580,408 561,535 (18,873) 580,987 Investment income 1,000 3,241 2,241 1,440 Other — 1 1 142 Total revenues 581,408 579,707 (1,701) 582,569 Expenditures: General government: School buildings — 500 (500) 235,000 School building major repairs 25,030 45,621 (20,591) 40,542 Chiniak School — 21,419 (21,419) 8,467 Borough building 563,878 453,832 110,046 472,601 Mental health center 8,000 1,883 6,117 16,427 Various borough buildings 2,500 52,239 (49,739) 150 Total expenditures 599,408 575,494 23,914 773,187 Excess (deficiency) of revenues over (under) expenditures (18,000) 4,213 22,213 (190,618) Other financing sources: Transfers in: General Fund — — — 34,500 Facilities Special Revenue Fund 18,000 40,000 (22,000) 118,000 Total other financing sources 18,000 40,000 (22,000) 152,500 Change in fund balance $— 44,213 44,213 (38,118) Fund balance, at beginning of year 189,610 227,728 Fund balance, at end of year $233,823 189,610 98 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Woodland Acres Street Light Service Area Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2012 (With financial information for the year ended June 30, 2011 2012 Variance with Final Budget Final Positive 2011 Budget Actual (Negative)Actual Revenues: Property taxes and assessments $10,550 11,574 1,024 10,498 Investment income — 506 506 123 Total revenues 10,550 12,080 1,530 10,621 Expenditures: General government: Support goods and services 6,020 21,876 (15,856) — Capital outlay 4,530 — 4,530 5,302 Total expenditures 10,550 21,876 (11,326) 5,302 Excess (deficiency) of revenues over (under) expenditures $— (9,796) 12,856 5,319 Fund balance, at beginning of year 17,938 12,619 Fund balance, at end of year $8,142 17,938 99 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Trinity Islands Street Light Service Area Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) 2012 Variance with Final Budget Final Positive 2011 Budget Actual (Negative)Actual Revenues: Property taxes and assessments $5,505 5,268 (237) 5,291 Investment income — 315 315 73 Total revenues 5,505 5,583 78 5,364 Expenditures: General government: Support goods and services 5,505 1,931 3,574 1,840 Excess of revenues over expenditures $— 3,652 3,652 3,524 Fund balance, at beginning of year 10,826 7,302 Fund balance, at end of year $14,478 10,826 100 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Tourism Development Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) 2012 Variance with Final Budget Final Positive 2011 Budget Actual (Negative)Actual Revenues: Transient accommodations tax $92,000 87,400 (4,600) 96,384 Investment income — 3,400 3,400 507 Total revenues 92,000 90,800 (1,200) 96,891 Expenditures: Community and economic development: Personnel services 5,860 — 5,860 2,003 Fringe benefits 2,230 — 2,230 907 Contracted services 10,000 — 10,000 — Contributions 73,910 73,910 — 72,066 Total expenditures 92,000 73,910 18,090 74,976 Excess of revenues over expenditures $— 16,890 16,890 21,915 Fund balance, at beginning of year 112,078 90,163 Fund balance, at end of year $128,968 112,078 101 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Mission Lake Tide Gate Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) 2012 Variance with Final Budget Final Positive 2011 Budget Actual (Negative)Actual Revenues: Property taxes and assessments $3,470 4,844 1,374 4,366 Investment income 230 600 370 157 Total revenues 3,700 5,444 1,744 4,523 Expenditures: Service district maintenance: Personnel services 2,000 46 1,954 12 Fringe benefits — 5 (5) 4 Support goods and services 1,700 9 1,691 5 Total expenditures 3,700 60 3,640 21 Excess of revenues over expenditures $— 5,384 5,384 4,502 Fund balance, at beginning of year 21,217 16,715 Fund balance, at end of year $26,601 21,217 102 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Fern Fuller Trust Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) 2012 Variance with Final Budget Final Positive 2011 Budget Actual (Negative)Actual Revenues: Investment income $5,000 10,777 5,777 3,630 Expenditures: General government: Distributions to beneficiaries — — — 6,000 Support goods and services — — — 98 Total expenditures — — — 6,098 Excess (deficiency) of revenues over (under) expenditures 5,000 10,777 5,777 (2,468) Other financing (uses): Transfers out: Hospital Facilities Enterprise Fund (66,500) (66,500) — (66,500) Change in fund balance $(61,500) (55,723) 5,777 (68,968) Fund balance, at beginning of year 448,524 517,492 Fund balance, at end of year $392,801 448,524 103 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Trinity Islands Paving Schedule of Revenues, Expenditures, and Changes in Fund (Deficit) Budget and Actual Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) 2012 Variance with Final Budget Final Positive 2011 Budget Actual (Negative)Actual Revenues: Property taxes and assessments $16,250 17,976 1,726 18,729 Investment income — 1,184 1,184 386 Total revenues 16,250 19,160 2,910 19,115 Expenditures: Service district maintenance - Support goods and services 12,015 30 11,985 — Debt service - Interest 4,235 4,231 4 5,223 Total expenditures 16,250 4,261 11,989 5,223 Excess of revenues over expenditures $— 14,899 14,899 13,892 Fund (deficit), at beginning of year (47,592) (61,484) Fund (deficit), at end of year $(32,693) (47,592) NONMAJOR CAPITAL PROJECT FUNDS The Borough Capital Projects Fund accounts for capital improvement projects related to various financing sources. The School Bond Capital Projects Fund accounts for educational related capital projects funded by general obligation bonds which will be paid for with property taxes and State of Alaska grants. The State Capital Grants Fund accounts for capital improvement projects relating to grants received from the State of Alaska. The Other Capital Projects Fund accounts for capital improvement projects related to various financing sources. 104 KODIAK ISLAND BOROUGH Nonmajor Capital Project Funds Combining Balance Sheet June 30, 2012 (With financial information at June 30, 2011) Borough School Bond State Other Capital Capital Capital Capital Assets Projects Projects Grants Projects 2012 2011 Equity in central treasury $787,095 4,587,100 459,873 2,160,636 7,994,704 7,708,575 Receivables: State of Alaska — — 10,093 25,581 35,674 84,393 Federal government — — 9 46,513 46,522 251,230 Accounts and other receivables, net 3,989 21,103 5,464 — 30,556 30,815 Prepaid items — — — 879 879 879 Total $791,084 4,608,203 475,439 2,233,609 8,108,335 8,075,892 Liabilities and Fund Balances Liabilities: Accounts payable 22,950 179 20,621 1,203 44,953 615,348 Due to other funds — — — — — 506,192 Unearned revenues — — 23,797 65,919 89,716 20,270 Total liabilities 22,950 179 44,418 67,122 134,669 1,141,810 Fund balances: Nonspendable — — — 879 879 — Assigned 768,134 4,608,024 431,021 2,165,608 7,972,787 7,738,350 Unassigned — — — — — (804,268) Total fund balances 768,134 4,608,024 431,021 2,166,487 7,973,666 6,934,082 Total $791,084 4,608,203 475,439 2,233,609 8,108,335 8,075,892 Totals 105 KODIAK ISLAND BOROUGH Nonmajor Capital Project Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) Borough School Bond State Other Capital Capital Capital Capital Projects Projects Grants Projects 2012 2011 Revenues: Intergovernmental: State sources $— — 48,507 42,499 91,006 85,054 Federal sources — — 17,587 172,828 190,415 255,164 Investment income 22,109 69,499 16,061 45,144 152,813 38,109 Other — — — — — 90,832 Total revenues 22,109 69,499 82,155 260,471 434,234 469,159 Expenditures: General government — — 196,040 — 196,040 — Capital outlay: Schools 3,018 407,621 — — 410,639 1,074,914 General 18,150 — 66,095 264,704 348,949 1,913,447 Total expenditures 21,168 407,621 262,135 264,704 955,628 2,988,361 Excess (deficiency) of revenues over (under) expenditures 941 (338,122) (179,980) (4,233) (521,394) (2,519,202) Other financing sources: Transfers in 145,709 — — — 145,709 1,713,542 Change in fund balances 146,650 (338,122) (179,980) (4,233) (375,685) (805,660) Fund balance, at beginning of year, as previously stated 621,484 4,946,146 745,500 2,170,720 8,483,850 7,739,742 Prior period adjustment — — (134,499) — (134,499) — Fund balances, at beginning of year 621,484 4,946,146 611,001 2,170,720 8,349,351 7,739,742 Fund balances, at end of year $768,134 4,608,024 431,021 2,166,487 7,973,666 6,934,082 Totals ENTERPRISE FUNDS The Municipal Solid Waste Collection and Disposal Fund accounts for the collection and disposal of solid waste and recycling services for the Kodiak Island Borough. The Hospital Facilities Fund accounts for rents on the Borough-owned hospital, hospital related state revenue sharing, and other hospital related revenue. In turn, it purchases hospital equipment and makes debt service payments on hospital related debt. The Kodiak Fisheries Research Center Fund accounts for rents and expenses on the Borough-owned Kodiak Fisheries Research Center. The three tenants: NOAA, Alaska Department of Fish & Game and University of Alaska, Fairbanks pay lease funds to participate in this multi-agency research facility committed to the preservation of the North Pacific marine ecosystem and resources. The 911 Service Fund accounts for funds collected from phone charges and pays for a 911 emergency system. 106 KODIAK ISLAND BOROUGH Municipal Solid Waste Collection and Disposal Schedule of Revenues, Expenses, and Changes in Net Assets Budget and Actual Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) Variance with Final Budget Final Positive 2011 Budget Actual (Negative)Actual Operating revenues: Solid waste collection $— — — 8,414 Solid waste disposal 2,236,307 2,301,757 65,450 2,374,861 Total operating revenues 2,236,307 2,301,757 65,450 2,383,275 Operating expenses: Personnel services 958,110 755,407 202,703 703,876 Refuse disposal — — — 29,119 Contracted services 172,000 329,425 (157,425) 111,446 Maintenance and repairs 36,000 127,287 (91,287) 21,743 Landfill closure and postclosure costs 317,852 265,602 52,250 374,716 Depreciation 274,120 289,927 (15,807) 280,516 General and administration 231,475 210,384 21,091 245,468 Recycling services 281,450 235,429 46,021 235,339 Contributions 33,800 64,673 (30,873) 5,688 Total operating expenses 2,304,807 2,278,134 26,673 2,007,911 Operating income (loss)(68,500) 23,623 92,123 375,364 Other income (expense): State of Alaska on-behalf payment 30,000 42,936 12,936 14,704 Investment income 50,000 146,069 96,069 57,721 Interest expense (25,000) (67,618) (42,618) (184,221) Total other income (expense)55,000 121,387 66,387 (111,796) Income (loss) before transfers (13,500) 145,010 158,510 263,568 Transfers in 13,500 13,500 — 13,500 Change in net assets $— 158,510 158,510 277,068 Net assets, at beginning of year 5,110,339 4,833,271 Net assets, at end of year $5,268,849 5,110,339 Enterprise Funds 2012 107 KODIAK ISLAND BOROUGH Hospital Facilities Schedule of Revenues, Expenses, and Changes in Net Assets Budget and Actual Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) Variance with Final Budget Final Positive 2011 Budget Actual (Negative)Actual Operating revenues: Lease income $720,000 720,000 — 720,000 Other — 60,000 60,000 — Total operating revenue 720,000 780,000 60,000 720,000 Operating expenses: Personnel services 10,000 10,344 (344) 5,000 Maintenance and repairs 62,705 1,786 60,919 — Depreciation 870,000 853,229 16,771 868,240 General and administration — — — — Total operating expenses 942,705 865,359 77,346 873,240 Operating income (loss)(222,705) (85,359) (17,346) (153,240) Other income (expense): Intergovernmental: State sources - grants 97,534 97,534 — — Contribution to Providence Hospital (150,000) (108,000) 42,000 (108,000) Investment income — 42,695 42,695 15,503 Interest expense — (43,523) (43,523) (46,375) Total other income (expense)(52,466) (11,294) 41,172 (138,872) Income (loss) before transfers (275,171) (96,653) 23,826 (292,112) Transfers in 66,500 66,500 — 66,500 Change in net assets $(208,671) (30,153) 23,826 (225,612) Net assets, at beginning of year 20,914,301 21,139,913 Net assets, at end of year $20,884,148 20,914,301 Enterprise Funds 2012 108 KODIAK ISLAND BOROUGH Kodiak Fisheries Research Center Schedule of Revenues, Expenses, and Changes in Net Assets Budget and Actual Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) Variance with Final Budget Final Positive 2011 Budget Actual (Negative)Actual Operating revenues: Lease income $1,612,650 1,636,728 24,078 2,012,864 Operating expenses: Personnel services 341,691 322,367 19,324 341,216 Maintenance and repairs 77,500 8,878 68,622 4 Depreciation 744,420 631,924 112,496 631,927 General and administration: Cleaning and janitorial 200 42 158 49,593 Heating 210,000 195,718 14,282 231,777 Electrical 167,000 161,273 5,727 161,996 Plumbing 161,000 27,563 133,437 27,767 Air conditioning 5,500 62 5,438 765 Elevators 3,000 1,800 1,200 2,187 Miscellaneous 120,443 104,644 15,799 77,670 Total operating expenses 1,830,754 1,454,271 376,483 1,524,902 Operating income (loss)(218,104) 182,457 400,561 487,962 Other income (expense): State of Alaska on-behalf payment — 32,883 32,883 5,883 Investment income 5,000 93,263 88,263 27,701 Interest expense (292,250) (292,250) — (322,525) Total other income (expense)(287,250) (166,104) 121,146 (288,941) Change in net assets $(505,354) 16,353 521,707 199,021 Net assets, at beginning of year 10,283,329 10,084,308 Net assets, at end of year $10,299,682 10,283,329 Enterprise Funds 2012 109 KODIAK ISLAND BOROUGH Enterprise Funds Schedule of Revenues, Expenses, and Changes in Net Assets Budget and Actual Year ended June 30, 2012 (With financial information for the year ended June 30, 2011) Variance with Final Budget Final Positive 2011 Budget Actual (Negative)Actual Operating revenues: Customer charges $50,000 50,442 442 53,041 Operating expenses: Personnel services 2,500 2,500 — 3,000 Miscellaneous 47,500 115 47,385 79 Telephone services — — — 49,962 Total operating expenses 50,000 2,615 47,385 53,041 Operating income $— 47,827 47,827 — Net assets, at beginning of year — — Net assets, at end of year $47,827 — 2012 911 Services Fund SUPPLEMENTARY SCHEDULES 110 Annual principal and interest requirements on General Obligation Refunding and Construction Bonds. Year Principal Interest Total 2013 2,960,000 1,235,770 4,195,770 2014 3,005,000 1,236,510 4,241,510 2015 1,170,000 1,134,960 2,304,960 2016 1,625,000 1,068,560 2,693,560 2017 1,695,000 1,002,360 2,697,360 2018 1,735,000 947,610 2,682,610 2019 1,805,000 889,310 2,694,310 2020 1,875,000 810,785 2,685,785 2021 1,965,000 722,197 2,687,197 2022 2,045,000 635,798 2,680,798 2023 2,140,000 541,998 2,681,998 2024 2,245,000 436,735 2,681,735 2025 2,360,000 325,268 2,685,268 2026 1,005,000 244,410 1,249,410 2027 1,050,000 195,863 1,245,863 2028 1,105,000 142,756 1,247,756 2029 535,000 86,869 621,869 2030 565,000 59,450 624,450 2031 595,000 30,494 625,494 31,480,000$ 11,747,701$ 43,227,701$ SUMMARY OF BONDED DEBT SERVICE REQUIREMENTS TO MATURITY KODIAK ISLAND BOROUGH June 30, 2012 111 Fiscal year Interest rate Interest due July 01 Principal due July 01 Interest due January 01 Total 2013 4.000%17,000 415,000 8,700 440,700 2014 4.000%8,700 435,000 - 443,700 25,700$ 850,000$ 8,700$ 884,400$ KODIAK ISLAND BOROUGH RETIREMENT SCHEDULE GENERAL OBLIGATION BOND, 2004 SERIES C June 30, 2012 1998 Bond Issue 2004 C BOND ISSUE This issue, dated July 21, 2004 was issued under a book entry system registered in the name of Cede & Company, as Nominee of the Depository Trust Company, New York, New York, the securities depository for the 2004 Series C Bond. This issue was marketed by the Alaska Municipal Bond Bank. Legal opinion was rendered by bond council, Wohlforth, Vassar, Johnson & Brecht of Anchorage, Alaska. This bond was issued to fund planning, design, and construction of capital improvements to the Larsen Bay School, Kodiak Middle School and Kodiak High School. The proceeds will also be used to develop an earthquake evaluation plan. 112 Fiscal year Interest rate Interest due November 01 Principal due November 01 Interest due May 01 Total 2013 3.50%29,375 490,000 20,800 540,175 2014 4.00%20,800 510,000 10,600 541,400 2015 4.00%10,600 530,000 10,600 551,200 60,775$ 1,530,000$ 42,000$ 1,632,775$ This issue, dated December 1, 2004, was issued under a book entry system registered in the name of Cede & Company, as Nominee of the Depository Trust Company, New York, New York, the securities depository for the 2004 Series B Bond. This issue was marketed by the Alaska Municipal Bond Bank. Legal opinion was rendered by bond council, Wohlforth, Vassar, Johnson & Brecht of Anchorage, Alaska. This bond was issued to fund the acquisition and construction of school capital improvements in the Borough, including a new school pool and the Kodiak High School Voc Ed/Classroom reclamation. KODIAK ISLAND BOROUGH GENERAL OBLIGATION BOND, 2004 SERIES B RETIREMENT SCHEDULE June 30, 2012 1998 Bond Issue 2004 D BOND ISSUE 113 Fiscal year Interest rate Interest due October 01 Principal due April 01 Interest due April 01 Total 2013 5.00%160,105 300,000 160,105 620,210 2014 5.00%152,605 320,000 152,605 625,210 2015 5.00%144,605 335,000 144,605 624,210 2016 5.00%136,230 350,000 136,230 622,460 2017 4.00%127,480 370,000 127,480 624,960 2018 4.00%120,080 380,000 120,080 620,160 2019 4.00%112,480 400,000 112,480 624,960 2020 4.25%104,480 415,000 104,480 623,960 2021 4.25%95,661 430,000 95,661 621,322 2022 4.38%86,524 450,000 86,524 623,048 2023 4.50%76,680 470,000 76,680 623,360 2024 4.70%66,105 490,000 66,105 622,210 2025 4.80%54,590 515,000 54,590 624,180 2026 4.90%42,230 540,000 42,230 624,460 2027 5.00%29,000 565,000 29,000 623,000 2028 5.00%14,875 595,000 14,875 624,750 1,523,730$ 6,925,000$ 1,523,730$ 9,972,460$ KODIAK ISLAND BOROUGH GENERAL OBLIGATION BOND, 2008 SERIES A This issue, dated November 1, 2008, was issued under a book entry system registered in the name of Cede & Company, as Nominee of the Depository Trust Company, New York, New York, the securities depository for the 2008 Series A Bond. This issue was marketed by the Alaska Municipal Bond Bank. Legal opinion was rendered by bond council, Birch, Horton, Bittner and Cherot of Anchorage, Alaska. This bond was issued to fund the acquisition and construction of school capital improvements in the Borough, including a new school pool. June 30, 2012 RETIREMENT SCHEDULE 1998 Bond Issue 2008 A BOND ISSUE 114 Fiscal year Interest rate Interest due August 1 Principal due February 1 Interest due February 1 Total 2013 3.08%56,700 1,390,000 56,700 1,503,400 2014 3.54%28,900 1,445,000 28,900 1,502,800 85,600$ 2,835,000$ 85,600$ 3,006,200$ KODIAK ISLAND BOROUGH GENERAL OBLIGATION BOND, 2009 SERIES A RETIREMENT SCHEDULE June 30, 2012 This issue, dated April 9, 2009, was issued under a book entry system registered in the name of Cede & Company, as Nominee of the Depository Trust Company, New York, New York, the securities depository for the General Obligation Bond, 2009 Series A. This issue was marketed by the Alaska Municipal Bond Bank. Legal opinion was rendered by bond council, Birch, Horton, Bittner and Cherot of Anchorage, Alaska. This bond was issued to refund the 1998 Series A Bond issue. 1998 Bond Issue 2009 A BOND ISSUE 115 Fiscal year Interest rate Interest due September 01 Principal due April 01 Interest due March 01 Total 2013 1.10%169,200 285,000 169,200 623,400 2014 1.53%164,925 295,000 164,925 624,850 2015 2.05%160,500 305,000 160,500 626,000 2016 2.36%155,925 310,000 155,925 621,850 2017 2.75%151,275 320,000 151,275 622,550 2018 3.12%146,475 330,000 146,475 622,950 2019 3.45%140,700 340,000 140,700 621,400 2020 3.70%133,900 355,000 133,900 622,800 2021 3.93%126,800 370,000 126,800 623,600 2022 4.80%119,400 385,000 119,400 623,800 2023 4.80%110,256 405,000 110,256 625,513 2024 4.80%100,638 425,000 100,638 626,275 2025 5.20%90,544 445,000 90,544 626,088 2026 5.20%79,975 465,000 79,975 624,950 2027 5.20%68,931 485,000 68,931 622,863 2028 5.20%56,503 510,000 56,503 623,006 2029 5.20%43,434 535,000 43,434 621,869 2030 5.20%29,725 565,000 29,725 624,450 2031 5.20%15,247 595,000 15,247 625,494 2,064,353$ 7,725,000$ 2,064,353$ 11,853,706$ This issue, dated March 1, 2011, was issued under a book entry system registered in the name of Cede & Company, as Nominee of the Depository Trust Company, New York, New York, the securities depository for the 2011 Series One Bond. This issue was marketed by the Alaska Municipal Bond Bank. Legal opinion was rendered by bond council, Birch, Horton, Bittner and Cherot of Anchorage, Alaska. This bond was issued to fund the High School Renovation and Renewal project. KODIAK ISLAND BOROUGH GENERAL OBLIGATION BOND, 2011 SERIES ONE RETIREMENT SCHEDULE June 30, 2012 1998 Bond Issue 2011 SERIES ONE BOND ISSUE 116 Fiscal year Interest rate Interest due September 1 Principal due Septenber 1 Interest due March 1 Total 2013 2.00%61,299$ 35,000$ 113,400$ 209,699$ 2014 2.00%113,400 - 113,400 226,800 2015 2.00%113,400 - 113,400 226,800 2016 4.00%113,400 435,000 104,700 653,100 2017 4.00%104,700 455,000 95,600 655,300 2018 2.00%95,600 460,000 91,000 646,600 2019 4.00%91,000 480,000 81,400 652,400 2020 5.00%81,400 495,000 69,025 645,425 2021 5.00%69,025 525,000 55,900 649,925 2022 4.00%55,900 545,000 45,000 645,900 2023 5.00%45,000 570,000 30,750 645,750 2024 5.00%30,750 600,000 15,750 646,500 2025 5.00%15,750 630,000 - 645,750 990,624$ 5,230,000$ 929,325$ 7,149,949$ KODIAK ISLAND BOROUGH GENERAL OBLIGATION BOND, 2012 SERIES A RETIREMENT SCHEDULE June 30, 2012 1998 Bond Issue 2012 A BOND ISSUE This issue, dated May 24, 2012 was issued under a book entry system registered in the name of Cede & Company, as Nominee of the Depository Trust Company, New York, New York, the securities depository for the 2012 Series A Bond. This issue was marketed by the Alaska Municipal Bond Bank. Legal opinion was rendered by bond council, Wohlforth, Vassar, Johnson & Brecht of Anchorage, Alaska. This bond was issued to refund part of the 2004C Bond which was issed to fund planning, design, and construction of capital improvements to the Larsen Bay School, Kodiak Middle School and Kodiak High School. 117 Fiscal year Interest rate Interest due September 1 Principal due Septenber 1 Interest due March 1 Total 2013 2.00%74,811$ 45,000$ 138,375$ 258,186$ 2014 2.00%138,375 - 138,375 276,750 2015 2.00%138,375 - 138,375 276,750 2016 4.00%138,375 530,000 127,775 796,150 2017 4.00%127,775 550,000 116,775 794,550 2018 2.00%116,775 565,000 111,125 792,900 2019 4.00%111,125 585,000 99,425 795,550 2020 5.00%99,425 610,000 84,175 793,600 2021 5.00%84,175 640,000 68,175 792,350 2022 4.00%68,175 665,000 54,875 788,050 2023 5.00%54,875 695,000 37,500 787,375 2024 5.00%37,500 730,000 19,250 786,750 2025 5.00%19,250 770,000 - 789,250 1,209,011$ 6,385,000$ 1,134,200$ 8,728,211$ KODIAK ISLAND BOROUGH GENERAL OBLIGATION BOND, 2012 SERIES B RETIREMENT SCHEDULE June 30, 2012 This issue, dated May 24, 2012 , was issued under a book entry system registered in the name of Cede & Company, as Nominee of the Depository Trust Company, New York, New York, the securities depository for the 2012 Series B Bond. This issue was marketed by the Alaska Municipal Bond Bank. Legal opinion was rendered by bond council, Wohlforth, Brecht, Cartlidge & Brooking of Anchorage, Alaska. This bond was issued to refund part of the 2004D bond issue,which was used to fund the acquisition and construction of school capital improvements in the Borough, including a new school pool and the Kodiak High School Voc Ed/Classroom reclamation. 1998 Bond Issue 2012 B BOND ISSUE SUPPLEMENTARY SCHEDULES STATISTICAL SECTION STATISTICAL SECTION This part of the Kodiak Island Borough’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the governments’ overall financial health. Contents Page Financial Trends These schedules contain trend information to help the reader understand how the government’s financial performance and well-being have changed over time. 119-123 Revenue Capacity These schedules contain information to help the reader assess the govern- ment’s most significant local revenue source, the property tax. 124-127 Debt Capacity These schedules present information to help the reader assess the afforda- bility of the government’s current levels of outstanding debt and the gov- ernment’s ability to issue additional debt in the future. 128-132 Demographic and Economic Information These schedules offer demographic and economc indicators to help the reader understand the environment within which the government’s finan- cial activities take place. 133-139 Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the revelant year. 118 119 2005 2006 2007 2008 2009 2010 2011 2012 Governmental activities: Invested in capital assets, net of related debt $61,154,204 $62,716,326 $73,425,394 $25,127,779 $71,534,766 $77,447,045 $81,789,375 $85,285,497 Unrestricted 45,052,197 45,653,357 37,640,716 89,853,794 48,140,406 48,992,902 47,094,977 48,265,320 Total governmental activities net assets $106,206,401 $108,369,683 $111,066,110 $114,981,573 $119,675,172 $126,439,947 $128,884,352 $133,550,817 Business-type activities: Invested in capital assets, net of related debt $39,878,785 $38,588,510 $38,623,762 $34,706,597 $38,135,340 $36,655,859 $35,170,143 $31,967,945 Unrestricted (7,263,950) (6,133,853) (5,503,362) (2,862,363) (2,939,301) (598,367) 1,137,826 4,532,561 Total business-type activities net assets $32,614,835 $32,454,657 $33,120,400 $31,844,234 $35,196,039 $36,057,492 $36,307,969 $36,500,506 Primary government: Invested in capital assets, net of related debt $101,032,989 $101,304,836 $112,049,156 $59,834,376 $109,670,106 $114,102,904 $116,959,518 $117,785,108 Unrestricted 37,788,247 39,519,504 32,137,354 86,991,431 45,201,105 48,394,535 48,232,803 55,522,297 Total primary government net assets $138,821,236 $140,824,340 $144,186,510 $146,825,807 $154,871,211 $162,497,439 $165,192,321 $173,307,405 Source: Borough general ledger The Kodiak Island Borough implemented GASB 34 in Fiscal Year 2005. That is why there is only 8 years of data. KODIAK ISLAND BOROUGH Net Assets by Component Last Eight Fiscal Years (accrual basis of accounting) Fiscal Year 120 2005 2006 2007 2008 2009 2010 2011 2012 Expenses Governmental activities: General government $7,133,461 $3,984,390 $4,755,754 $4,226,759 $3,723,964 $4,479,415 $5,109,232 $4,281,383 Public safety - - - 509,697 579,710 612,763 664,349 622,396 Emergency preparedness 25,850 8,598 10,384 13,841 14,988 10,511 11,705 21,423 Community and economic development 509,680 784,002 786,614 1,105,156 908,501 1,034,686 1,211,189 1,195,237 Health and sanitation 387,619 403,866 414,144 449,792 371,673 406,087 392,011 391,996 Education, culture, and recreation 185,993 164,053 161,247 183,747 248,571 192,182 85,690 64,289 Parks and recreation - 13,625 5,825 Service district maintenance 347,934 336,385 362,189 378,661 398,219 543,897 593,388 705,665 Education, culture, and recreation 10,207,757 10,831,588 10,788,188 11,524,160 12,354,129 12,423,691 12,834,349 11,998,842 Interest on long-term debt 1,101,598 1,700,089 1,290,216 1,270,423 1,408,045 1,336,068 1,508,052 1,188,945 Total governmental activities expenses 19,899,892 18,212,971 18,568,736 19,662,236 20,007,800 21,039,300 22,423,590 20,476,001 Business-type activities: Municipal solid waste collection and disposal 3,362,348 3,446,453 2,888,821 4,628,826 3,852,158 4,283,148 2,192,132 2,345,752 Hospital facilities 1,344,987 1,304,583 1,297,419 1,124,650 1,095,535 1,035,020 1,027,615 1,016,882 Kodiak fisheries research center 1,878,788 1,856,875 1,889,750 2,027,432 1,960,404 1,927,580 1,847,427 1,746,952 911 services 69,178 57,194 64,140 107,980 43,043 42,474 53,041 2,615 Total business-type activities expenses 6,655,301 6,665,105 6,140,130 7,888,888 6,951,140 7,288,222 5,120,215 5,112,201 Total primary government expenses $26,555,193 $24,878,076 $24,708,866 $27,551,124 $26,958,940 $28,327,522 27,543,805 25,588,202 Program Revenues Governmental activities: Charges for services: General government $367,530 $311,802 $1,058,330 $436,284 $705,166 $703,431 $658,463 $673,050 Public safety - - - - 12,361 12,762 33,755 11,646 Community and economic development 21,886 - 68,867 148,682 - - - - Health and sanitation - - - 7,370 - - - - Education, culture, and recreation 56,704 108,218 - - - - - - Service district maintenance 20,000 20,000 20,015 28,345 25,000 25,000 27,600 1 Primary and secondary education - 95,025 - - - - - - Operating grants and contributions 721,453 1,240,547 1,935,687 1,911,246 2,543,254 2,306,394 2,295,661 2,479,263 Capital grants 2,917,160 298,852 184,922 1,926,465 2,331,253 6,518,798 3,241,219 574,439 Total governmental activities program revenues 4,104,733 2,074,444 3,267,821 4,458,392 5,617,034 9,566,385 6,256,698 3,738,399 Business-type activities: Charges for services: Municipal solid waste collection and disposal 3,141,856 3,665,289 3,932,985 3,911,771 3,603,995 4,350,369 2,397,979 2,301,757 Hospital facilities 1,153,333 1,153,333 1,081,110 720,000 3,575,835 1,867,990 720,000 720,000 Kodiak fisheries research center 1,566,686 1,572,474 1,581,850 1,614,532 1,598,260 1,610,775 2,018,747 1,636,728 911 services 26,721 65,614 62,698 54,925 52,654 42,474 53,041 - Operating grants and contributions - - - - - - - 75,819 Capital grants - - - - - - - 97,534 Total business-type activities program revenues 5,888,596 6,456,710 6,658,643 6,301,228 8,830,744 7,871,608 5,189,767 4,831,838 Total primary government program revenues $9,993,329 $8,531,154 $9,926,464 $10,759,620 $14,447,778 $17,437,993 $11,446,465 $8,570,237 Net(expense)/revenue Governmental activities $(15,795,159) $(16,138,527) $(15,300,915) $(15,203,844) $(14,390,766) $(11,472,915) $(16,166,892) $(16,737,602) Business-type activities (766,705) (208,395) 518,513 (1,587,660) 1,879,604 583,386 69,552 (280,363) Total primary government net expense $(16,561,864) $(16,346,922) $(14,782,402) $(16,791,504) $(12,511,162) $(10,889,529) $(16,097,340) $(17,017,965) General Revenues and Other Changes in Net Assets Governmental activities: Taxes: Property taxes $9,063,729 $9,807,551 $9,754,916 $10,118,602 $10,592,258 $11,051,740 $11,945,103 $13,327,552 Severance taxes 1,005,539 1,186,908 1,316,689 1,436,210 1,311,188 1,336,075 1,649,275 1,970,265 Unrestricted grants and contributions 2,384,538 3,482,351 3,242,740 3,144,750 4,214,617 4,089,966 3,642,009 4,199,766 Land sales - - - - 26,369 760 2,383 4,540 Investment earnings 1,750,321 2,798,391 3,745,990 3,912,145 2,082,615 1,219,201 713,414 1,788,903 Other 55,692 779,328 (225,636) 380,550 226,586 619,948 739,113 327,540 Transfers 170,602 247,280 162,643 127,050 (765,490) (80,000) (80,000) (80,000) Extraordinary item - - - - 1,396,222 - - - Total governmental activities $14,430,421 $18,301,809 $17,997,342 $19,119,307 $19,084,365 $18,237,690 $18,611,297 $21,538,566 Business-type activities: Investment earnings 70,812 161,892 274,126 434,164 273,973 198,067 100,925 282,027 Other - 391,895 35,747 4,380 50 - - 110,442 Transfers (170,602) (247,280) (162,643) (127,050) 765,490 80,000 80,000 80,000 Extraordinary item - - - - 432,688 - - - Total business-type activities (99,790) 306,507 147,230 311,494 1,472,201 278,067 180,925 472,469 Total primary government $14,330,631 $18,608,316 $18,144,572 $19,430,801 $20,556,566 $18,515,757 $18,792,222 $22,011,035 Change in Net Assets Governmental activities $(1,364,738) $2,163,282 $2,696,427 $3,915,463 $4,693,599 $6,764,775 $2,444,405 $4,800,964 Business-type activities (866,495) 98,112 665,743 (1,276,166) 3,351,805 861,453 250,477 192,106 Total primary government $(2,231,233) $2,261,394 $3,362,170 $2,639,297 $8,045,404 $7,626,228 $2,694,882 $4,993,070 The Kodiak Island Borough implemented GASB 34 in Fiscal Year 2005. That is why there is only 8 years of data. KODIAK ISLAND BOROUGH Changes in Net Assets Last eight Fiscal Years (accrual basis of accounting) Fiscal Year 121 KODIAK ISLAND BOROUGH Fund Balances of Governmental Funds Last Three Fiscal Years (modified accrual basis of accounting) 2010 2011 2012 General Fund: Nonspendable $15,703 $6,801 $166,020 Committed - - - Unassigned 2,366,973 1,952,757 3,126,037 Total General Fund $2,382,676 $1,959,558 $3,292,057 All other governmental funds Nonspendable $34,342 $21,704 $5,114,902 Committed 52,453,871 57,633,409 37,288,510 Assigned - - 11,464,575 Unassigned (805,499) (1,179,132) (1,989,279) Total all other governmental funds $51,682,714 $56,475,981 $51,878,708 The Kodiak Island Borough implemented GASB 54 in Fiscal Year 2011. That is why there is only 3 years of data. Fiscal Year 122 Fiscal Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 Revenues Property taxes and assessments $7,960,146 9,042,843 $9,786,201 9,681,815 10,175,295 10,477,347 10,993,175 11,909,806 13,052,598 Transeint accomidations tax 56,177 20,886 47,645 68,867 79,182 88,338 86,003 96,384 87,400 Intergovernmental: State sources 2,121,420 2,169,803 3,368,491 4,012,647 4,428,472 5,966,808 10,610,231 7,029,684 5,308,444 Federal sources 1,245,337 3,853,348 1,766,926 1,417,403 2,553,990 3,122,316 2,338,468 2,149,205 1,945,024 Severance taxes 799,693 1,005,539 1,186,908 1,316,689 1,436,210 1,311,188 1,336,075 1,649,275 1,970,265 Licenses, permits, fees, and other local revenues 764,913 692,540 820,286 690,962 658,381 742,527 766,193 719,818 684,697 Other revenues 222,837 75,841 125,040 633,925 353,850 418,741 459,412 720,659 44,304 Investment earnings 866,143 1,772,893 2,803,466 3,751,609 3,918,008 2,088,915 1,225,938 706,677 1,857,413 Total revenues 14,036,666 18,633,693 19,904,963 21,573,917 23,603,388 24,216,180 27,815,495 24,981,508 24,950,145 Expenditures General government 2,118,166 2,713,633 3,950,927 4,504,052 3,818,544 4,067,024 4,600,601 4,818,287 4,848,805 Public safety 864,703 425,506 — — 385,529 460,826 502,491 537,623 447,479 Emergency preparedness 48,755 23,521 6,098 7,884 5,713 12,488 8,011 11,705 18,923 Community and economic development 536,111 509,680 784,002 786,614 923,203 908,501 1,034,686 1,211,189 1,195,237 Health and sanitation department 331,884 329,738 363,520 373,132 387,053 333,747 371,321 392,011 391,996 Education, culture, and recreation 217,759 185,993 161,633 158,161 183,747 248,571 192,182 85,690 64,289 Parks and recreation 13,625 5,825 Maintenance and operations 567,094 698,119 — — — — — — — Service district maintenance 425,712 347,934 336,385 498,539 374,320 398,219 543,897 593,388 705,665 Primary and secondary education 7,721,706 7,973,035 8,430,840 8,387,440 9,123,412 9,956,618 9,980,350 10,127,350 10,337,349 Fern Fuller trust 24,500 22,547 — — — — — — — Capital outlay: Schools 131,324 68,109 464,142 1,436,639 7,029,628 14,857,064 7,359,932 1,881,069 5,255,037 General 656,423 2,972,174 332,398 373,038 887,189 1,277,106 4,319,438 4,839,652 562,007 Debt service: Principal 1,260,167 1,784,859 1,814,553 2,100,361 2,205,441 2,495,056 2,685,606 2,750,690 2,780,776 Interest 644,046 984,766 1,584,763 1,336,349 1,263,176 1,578,408 1,356,872 1,292,645 2,695,657 Other charges-bond issuance costs — 43,661 — — — 68,635 — 40,689 100,149 Total expenditures 15,548,350 19,083,275 18,229,261 19,962,209 26,586,955 36,662,263 32,955,387 28,595,613 29,409,194 Excess of revenues over (under) expenditures (1,511,684)(449,582)1,675,702 1,611,708 (2,983,567)(12,446,083)(5,139,892)(3,614,105)(4,459,049) Other Financing Sources (Uses) Proceeds from sales of bonds — 20,350,000 — — 8,000,000 — — 8,049,233 — Bond premium — 121,590 — — — — — — — Refunding bonds issued — — — — 6,740,000 — — 13,578,039 Payment to refunded bond escrow agent (6,865,467)— — (12,180,000) Land sale proceeds 9,206 22,738 177,164 47,087 19,458 30,561 138,867 15,021 10,735 Transfers in 3,605,614 1,800,212 1,751,182 2,626,853 2,966,610 6,144,301 3,211,195 3,782,289 957,652 Transfers out (1,961,054)(1,629,610)(1,503,902)(2,464,210)(2,839,560)(6,909,791)(3,291,195)(3,862,289)(1,037,652) Total other financing sources(uses)1,653,766 20,664,930 424,444 209,730 8,146,508 (860,396)58,867 7,984,254 1,328,774 Net change in fund balances $142,082 20,215,348 2,100,146 1,821,438 5,162,941 (13,306,479)(5,081,025)4,370,149 (3,130,275) Debt service as a percentage of noncapital expenditurs 13.00 %15.01 %19.99 %19.20 %19.45 %20.91 %19.41 %18.53 %24.19 The Kodiak Island Borough implemented GASB 34 in Fiscal Year 2005. That is why there is only 8 years of data. KODIAK ISLAND BOROUGH Changes in Fund Balances of Governmental Funds Last Eight Fiscal Years (modified accrual basis of accounting) 123 KODIAK ISLAND BOROUGH General Revenues by Source(a) Last Ten Fiscal Years Licenses,Inter- Fiscal Permits Governmental Investment Operating Miscellaneous Year Taxes and Fees Revenue Income Transfers Revenue Total 2002 8,017,344 95,857 3,397,240 294,675 200,000 140,901 12,146,017 2003 8,028,513 153,727 2,683,460 171,532 1,000,000 — 12,037,232 2004 8,165,326 187,898 2,010,431 105,812 850,000 — 11,319,467 2005 9,378,816 161,621 1,925,405 265,392 — — 11,731,234 2006 10,257,023 171,962 2,369,185 469,913 — — 13,268,083 2007 10,218,016 78,720 3,325,899 399,149 — 82,604 14,104,388 2008 10,792,741 100,256 3,276,741 544,926 — — 14,714,664 2009 10,864,441 65,417 4,461,624 292,825 — 131,944 15,816,251 2010 11,219,182 71,319 4,123,507 178,567 — 38,352 15,630,927 2011 12,412,832 72,394 3,642,009 (21,628) — 537,235 16,642,842 2012 2,291,625 65,421 4,425,447 281,792 — 16,177 7,080,462 (a) Includes General Fund only. Source: Borough general ledger. 124 KODIAK ISLAND BOROUGH Assessed and Estimated Actual Value of Taxable Property Last Ten Fiscal Years Ratio of Total Total Assessed to Real Property Personal Property Total Direct Total Year Ended Assessed Full Value Assessed Full Value Assessed Full Value Tax Full Value June 30,Value Determination Value Determination Value Determination Rate Determination 2003 642,995,612 679,949,700 117,456,245 323,755,200 760,451,857 1,003,704,900 9.25 75.76% 2004 660,040,861 687,078,300 110,941,506 307,988,900 770,982,367 995,067,200 9.25 77.48 2005 678,425,914 731,267,000 105,481,537 300,735,600 783,907,451 1,032,002,600 10.25 75.96 2006 692,572,845 786,373,800 106,206,504 309,114,600 798,779,349 1,095,488,400 11.00 72.92 2007 710,848,299 836,778,900 94,833,515 297,380,200 805,681,814 1,134,159,100 10.50 71.04 2008 734,527,929 941,403,800 100,997,608 298,543,700 835,525,537 1,239,947,500 10.50 67.38 2009 765,152,958 817,641,308 105,320,027 233,623,664 870,472,985 1,051,264,972 10.50 82.80 2010 805,000,744 855,452,864 108,014,241 227,294,006 913,014,985 1,082,746,870 10.50 84.32 2011 875,787,940 1,007,199,396 113,091,185 236,610,137 988,879,125 1,051,264,972 10.50 94.07 982,212,980 1,101,703,000 101,821,700 334,774,600 1,084,034,680 1,436,477,600 10.75 75.46 Sources: Borough assessment and tax records Note: Property in Kodiak Island Bourough is reassesed once every three years. Property is assessed at actual value; therefore, the assessed values are equal to actual value.Tax rates are per $1,000 of assessed value. Fiscal 2012 $0 $200,000,000 $400,000,000 $600,000,000 $800,000,000 $1,000,000,000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Last Ten Years Assessed Values 125 KODIAK ISLAND BOROUGH Direct and Overlapping Property Tax Rates and Contributions to the School District (per $1000 of Assessed Value) Last Ten Fiscal Years Overlapping Rates Woodland²Trinity²Mission² Fiscal Acres Islands Lake Fire Areas² Year Borough Education Renewal City¹Street Street Tide Road Services Areas²Fire Ended Basic Support and of Lighting Lighting Gate Monashka Service Bay View Womens Protection Womens June 30, Rate Fund Debt Service Replacement Kodiak Area Area Area Bay District 1 Road Bay Area No. 1 Bay Airport 2003 9.25 — — — 2.00 — — — 1.50 1.00 1.00 2.00 1.50 1.25 — 2004 9.25 — — — 2.00 — 0.50 1.00 1.50 1.00 1.00 2.00 1.50 1.25 — 2005 10.25 — — — 2.00 — 0.50 1.00 1.50 1.00 1.00 2.00 1.50 1.25 1.25 2006 11.00 — — — 2.00 — 0.50 1.00 2.50 1.25 1.00 2.00 1.50 1.25 1.25 2007 10.50 — — — 2.00 — 0.50 1.00 2.50 1.25 1.00 2.00 1.50 1.25 1.25 2008 10.50 — — — 2.00 — 0.50 1.00 2.50 1.25 1.00 2.00 1.50 1.25 1.25 2009 10.50 — — — 2.00 0.25 0.50 1.00 2.50 1.50 1.00 2.00 1.50 1.25 1.25 2010 10.50 — — — 2.00 0.25 0.50 1.00 2.50 1.50 1.00 2.00 1.50 1.25 1.25 2011 10.50 — — — 2.00 0.25 0.50 1.00 2.50 1.50 1.00 2.50 1.50 1.25 1.25 2012 0.03 9.09 1.55 0.08 2.00 0.25 0.50 1.00 2.50 1.50 1.00 2.50 1.50 1.25 1.25 Note: The maximum mill rate allowed by State code is 30 mills ¹Overlapping rates are those of local governments that apply to property owners within the City of Kodiak. ²Overlapping rates are those which apply to property owners located within special taxing districts in the borough.They do not apply to every property owner in the Borough. Direct Rate 126 KODIAK ISLAND BOROUGH Property Tax Levies and Collections Last Ten Fiscal Years Fiscal Year Collections Ended in Subsequent June 30,Years 2003 8,086,749 7,592,138 93.9 494,611 8,086,749 100.0 2004 8,151,511 7,637,665 93.7 513,829 8,151,494 100.0 2005 8,756,263 8,602,243 98.2 153,837 8,756,080 100.0 2006 9,733,253 9,320,203 95.8 412,332 9,732,535 100.0 2007 9,298,329 9,169,456 98.6 126,255 9,295,711 100.0 2008 9,979,775 9,615,784 96.4 356,327 9,972,111 99.9 2009 10,231,461 10,201,209 99.7 7,356 10,208,565 99.8 2010 10,879,276 10,487,467 96.4 286,320 10,773,787 99.0 2011 11,536,758 11,499,457 99.7 39,773 11,539,230 100.0 2012 13,255,665 13,131,866 99.1 — 13,131,866 99.1 Source: Borough general ledger. Collected within the Fiscal Year of the Levy Total Collections to DateTaxes Levied for the Fiscal Year Percentage of LevyAmountAmountof Levy Percentage 127 KODIAK ISLAND BOROUGH Principal Property Tax Payers Current Year and Ten Years Ago Percentage Percentage Taxable of Total Borough Taxable of Total Borough Assessed Assessed Assessed Assessed Taxpayer Value Rank Value Value Rank Value Ocean Beauty Seafoods Inc (c) $15,649,700 1 1.7% $10,294,550 4 1.4% Westward Seafoods Inc 13,005,300 2 1.3% — — — International Seafoods of AK 12,172,100 3 1.2% 11,065,508 1 1.5% Alaska Communications Systems (b)10,238,700 4 1.1% — — Wal-Mart Real Est Bus Trust 9,540,700 5 1.1% 9,039,495 6 1.2% North Pacific Seafoods (APS)9,389,200 6 1.0% — — — Trident Seafoods Corp 8,789,400 7 0.9% — 0 Brechan Enterprises 8,468,200 8 0.9% 6,297,365 10 0.8% GCI Communication 8,279,000 9 0.7% — — — Horizon Lines of Alaska LLC (a)6,708,351 10 0.7% 9,539,545 3 1.3% Western Alaska Fisheries — — — 13,005,141 2 1.7% Alaska Pacific Seafoods — — — 10,053,751 5 1.3% Kodiak Fishmeal Company — — — 8,106,952 7 1.1% Mill Bay Plaza Assoc LTD — — — 7,138,400 8 0.9% Afognak Native Corporation — — — 7,835,600 9 1.0% Total $102,240,651 10.3% $92,376,307 11.9% Source: Borough tax records. (a) In 2001 company name was CSX Lines LLC (b) In 2001 company name was T.U. of the Northland. (c) In 2001 company name was King Crab/Ocean Beauty 2012 2002 128 Net Gross Less Debt Total Debt Per Fiscal Assessed Bonded Service Primary Per Assessed Year Population Value Debt Fund Government Capita Value 2003 13,817 (a)760,451,857 15,620,000 17,879 15,602,121 1,129 2.05% 2004 13,573 (a)770,982,367 14,385,000 33,915 14,351,085 1,057 1.86% 2005 13,693 (b)783,907,451 32,965,000 (348,233)33,313,233 2,433 4.25% 2006 13,457 (c)783,907,451 31,155,000 (81,511)31,236,511 2,321 3.98% 2007 13,664 (a)805,681,814 29,060,000 (60,380)29,120,380 2,131 3.61% 2008 13,954 (a)835,525,537 34,860,000 (9,862)34,869,862 2,499 4.17% 2009 13,860 (a)870,472,985 32,245,000 5,938 32,239,062 2,326 3.70% 2010 13,592 (a)913,014,985 29,565,000 22,255 29,542,745 2,174 3.24% 2011 13,870 (a)988,879,125 34,820,000 5,326 34,814,674 2,510 3.52% 14,041 (a)1,039,223,833 31,480,000 (197,567)31,677,567 2,256 3.05% Sources:Information obtained from assessment records and Borough general ledger except as otherwise noted. (a) Information obtained from State of Alaska, Department of Community and Regional Affairs, Certified Population for Revenue Sharing Program. (b) Information obtained from State of Alaska, Department of Commerce, Community and Economic Development, Community Database. (c) Information obtained from State of Alaska, Department of Labor, Economic Information. Note: Detail regarding the borough's outstanding debt can be found in the notes to the financial statements. KODIAK ISLAND BOROUGH Ratios of Net Bonded Debt Last Ten Fiscal Years 2012 129 KODIAK ISLAND BOROUGH Computation of Direct and Overlapping Debt Percentage Kodiak Island Net Debt Applicable to this Borough Outstanding Governmental Share of (a)Unit (b)Debt (c) Kodiak Island Borough: General obligation bonds $33,560,346 100% $33,560,346 City of Kodiak: General obligation bonds 7,415,000 100% 7,415,000 Total $40,975,346 $40,975,346 (a)Gross debt outstanding less applicable amounts in the Debt Service Funds. (b)Determined by ratio of assessed valuation of property subject to taxation in overlapping unit to valuation of property subject to taxation in reporting unit. (c)Per Alaska Statute 29.45.090 there is a limit of 30 mills for ad valorem taxes. Per Alaska Statute 29.45.100 the limitation on maximum mill rate does not apply to taxes levied to pay bonds. Sources: Borough general ledger and City of Kodiak records. June 30, 2011 130 2005 2006 2007 2008 2009 2010 2011 2012 Assessed value $783,907,451 798,779,349 805,681,814 835,525,537 870,472,985 913,014,985 988,879,125 1,098,811,933 Plus exempt property 32,491,840 45,783,490 49,539,000 50,194,170 45,188,050 50,452,120 55,543,030 59,588,100 Total $816,399,291 844,562,839 855,220,814 885,719,707 915,661,035 963,467,105 1,044,422,155 1,158,400,033 The State of Alaska does not mandate a debt limit to its municipalities and political subdivisions. Debt capacity is ultimately determined by the voters and the marketplace. Source: Borough assessment records (certified tax rolls). KODIAK ISLAND BOROUGH Legal Debt Margin Information Last Eight Fiscal Years 131 KODIAK ISLAND BOROUGH Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total General Governmental Expenditures and Transfers Last Ten Fiscal Years Total General Ratio of Fund debt service Fiscal Interest Total debt expenditures to general year Principal (a)and fees service and transfers expenditures 2003 1,140,833 803,224 1,944,057 13,071,957 14.9 2004 1,255,833 667,744 1,923,577 11,014,093 17.5 2005 1,780,417 983,195 2,763,612 12,027,717 23.0 2006 1,814,553 1,583,488 3,398,041 13,054,983 26.0 2007 2,100,361 1,329,456 3,429,817 13,337,188 25.7 2008 2,205,441 1,255,313 3,460,754 14,277,498 24.2 2009 2,495,056 1,571,295 4,066,351 15,922,441 25.5 2010 2,685,606 1,350,620 4,036,226 16,372,540 24.7 2011 2,750,690 1,287,822 4,083,335 17,065,960 23.9 2,780,776 2,691,426 5,472,202 5,747,963 95.2 (a)Serial maturities in the case of serial bonds; annual Debt Service Fund requirements in the case of term bonds. (a) Sources: Borough general ledger and debt documents. 2012 Serial maturities in the case of serial bonds; annual Debt Service Fund requirements in the case of 132 KODIAK ISLAND BOROUGH Ratios of Outstanding Debt by Type General Total Percent of Obligation Notes Primary Personal Per Bonds Payable Government Income Capita 15,620,000 1,241,254 16,861,254 4.44%1,220 14,385,000 1,262,123 15,647,123 3.98%1,153 32,965,000 1,270,210 34,235,210 8.26%2,500 31,155,000 1,582,188 32,737,188 7.38%2,433 29,060,000 1,636,924 30,696,924 6.53%2,247 34,860,000 1,768,660 36,628,660 7.44%2,625 32,245,000 1,864,503 34,109,503 6.22%2,461 29,565,000 1,989,995 31,554,995 *2,322 34,820,000 2,790,987 37,610,987 *2,712 31,840,000 7,652,682 39,492,682 *2,813 Note: *Information not available at report time. Last Ten Fiscal Years Fiscal Year 2008 2003 2004 2005 2012 2006 2007 2011 2010 2009 Detail regarding the borough's outstanding debt can be found in the notes to the financial statements. All general obligation bonds are related to Governmental Activities, all notes payable are related to business type activities. 133 KODIAK ISLAND BOROUGH Demographic and Economic Statistics Last Ten Fiscal Years Per Capita Percentage Calendar Personal Personal School Unemployment Year Population (a)Income (c)Income (c)Enrollment (b)Rate (c) 2003 13,817 399,836,000 30,056 2,750 9.6 2004 13,573 418,937,000 31,791 2,677 8.7 2005 13,693 443,300,000 33,969 2,678 8.3 2006 13,457 469,512,000 35,860 2,718 7.3 2007 13,664 506,398,000 38,733 2,636 6.0 2008 13,954 548,099,000 41,617 2,671 6.6 2009 13,860 577,818,419 41,690 2,598 7.2 2010 13,592 566,433,008 41,764 2,567 7.2 2011 13,870 NA (d)2,543 6.9 14,041 NA (d)2,535 6.2 Sources: (a)State of Alaska, DCRA certified population. (b)Alaska Dept of Education, Average Daily Membership by Fiscal Year at www.eed.state.ak.us/stats/QuickFacts/ADM.pdf. (c)Department of Labor using http://live.laborstats.alaska.gov/labforce/labdata.cfm?s=16&a=0 (d)Per Capita Personal Income and Personal Income figures are not yet available for 2010 to 2011. 2012 — 5,000 10,000 15,000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Borough Population and Student Count Population (a)School Enrollment 134 Fiscal Year 2005 Fiscal Year 2006 Fiscal Year 2007 Fiscal Year 2008 Fiscal Year 2009 Fiscal Year 2010 Fiscal Year 2011 Average Average Average Average Average Average Average Average Average Average Average Average Average Average Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Employment Earnings Employment Earnings Employment Earnings Employment Earnings Employment Earnings Employment Earnings Employment Earnings Total Industries 5,381 $2,871 5,553 $2,926 5,616 $3,060 5,803 $3,111 5,961 $3,100 5,961 $3,100 6,416 $3,362 Private Ownership 4,042 2,757 4,191 2,803 4,160 2,979 4,340 3,006 4,485 2,956 4,485 2,956 4,898 3,263 Total Government 1,339 3,214 1,361 3,306 1,456 3,291 1,483 3,424 1,475 3,538 1,475 3,538 1,518 3,681 Private Goods-Producing 1,659 3,489 1,691 3,382 1,631 3,555 1,778 3,484 1,814 3,290 1,814 3,290 2,113 3,619 Private Service-Providing 2,384 2,245 2,500 2,412 2,529 2,608 2,562 3,006 2,671 2,730 2,671 2,730 2,785 2,993 Number of Business by Company Size 2006¹ Number Number Number Number Number Number Number Business Size of Businesses of Businesses of Businesses of Businesses of Businesses of Businesses of Businesses 250 to 499 employees 2 4 4 4 5 3 100 to 249 employees 10 8 8 9 7 10 50 to 99 employees 9 9 9 N/A 8 7 20 to 49 employees 24 27 27 N/A N/A N/A 10 to 19 employees 59 58 58 N/A N/A N/A ¹Data from http://almis.labor.state.ak.us Note: No principal employer data available from Department of Labor. Note: No data available before 2005. Note: No data available after 2011 KODIAK ISLAND BOROUGH Average Monthly Employment & Earnings Last Seven Fiscal Years 135 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Land area - square miles 7,130 7,130 7,130 7,130 7,130 7,130 7,130 7,130 7,130 7,130 Miles of improved street 25.6 25.6 25.6 25.6 25.6 25.6 25.6 25.6 25.6 26.1 Building permits: Permits issued 213 223 205 222 190 190 192 208 204 167 Value of buildings (thousands)14,623 17,658 12,689 11,928 12,058 33,145 15,007 16,445 30,832 10,171 Fire Protection: Number of fire stations 2 2 2 2 2 2 2 2 2 2 Number of employees 1 1 1 1 1 1 1 1 1 1 Police Protection: none (provided by the City of Kodiak within the city limits and by the State of Alaska outside the city boundaries.) Recreation: Parks (number of acres)223 223 223 223 223 223 223 223 224 224 Facilities: Number of playgrounds 15 15 15 15 15 15 15 15 16 16 Number of swimming pools 1 1 1 1 1 1 1 1 1 1 Public Education: Number of schools: Kodiak Area Elementary 4 4 4 4 4 4 4 4 4 4 Kodiak Area Middle School 1 1 1 1 1 1 1 1 1 1 Kodiak Area High School 1 1 1 1 1 1 1 1 1 1 Village Schools (a)7 7 7 8 7 6 7 7 8 8 Number of support personnel (b)137 201 146 151 202 205 217 217 215 215 Number of teachers (d)173 227 217 206 209 218 203 218 201 201 Number of students 2,750 2,677 2,678 2,718 2,636 2,671 2,598 2,567 2,543 2,543 Number of Municipal Employees 39 41 41 41 43 43 43 43 43 45 Elections: Number of registered voters 10,101 9,671 9,282 9,300 9,417 9,587 9,599 9,649 9,619 9,479 Number voting in last election 2,181 2,599 2,181 2,200 2,407 2,105 2,477 2,477 2,311 2,139 Percent of registered voters 22%27%23%24%26%22%26%26%24%23% Sources: Borough Departments, Kodiak Island Borough School District and City of Kodiak (a) The majority of Village Schools are grades K-12.(c) In FY96 this was changed to full time equivalents. (b) All non-teaching employees.(d) School district personnel figures include staffing from the General Fund and Grants. Grant staffing varies from year to year depending on the number of grants received. KODIAK ISLAND BOROUGH MISCELLANEOUS STATISTICAL DATA Last Ten Fiscal Years 136 KODIAK ISLAND BOROUGH Property Value, Construction, and Bank Deposits Last Ten Fiscal Years Construction Property Value* Commercial Residential Fiscal No. of No. of year permits Value permits Value Commercial Residential 2003 47 2,915,740 166 11,707,269 120,352,000 206,386,964 463,419,197 2004 44 2,859,775 179 14,798,679 130,325,000 207,611,182 480,581,831 2005 47 2,097,983 158 10,590,784 133,370,000 210,328,700 482,244,145 2006 30 1,555,718 192 10,372,416 141,434,000 213,258,488 497,589,811 2007 42 3,277,292 148 8,780,900 140,915,000 227,514,405 507,013,524 2008 53 25,269,361 129 7,875,188 139,416,000 275,369,008 542,272,300 2009 50 34,081,887 147 7,848,428 175,141,000 215,695,225 589,494,919 2010 52 4,756,124 156 11,689,178 192,000,000 195,890,603 617,325,049 2011 46 24,165,884 158 6,666,400 194,289,000 222,419,696 725,191,600 48 5,693,295 119 4,477,641 227,392,000 240,709,680 741,503,300 *Assessed value. Sources: Borough assessing records and City of Kodiak building department and FDIC. Deposits in local banks 2012 — 50,000,000 100,000,000 150,000,000 200,000,000 250,000,000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Deposits in Kodiak Banks 137 2005 2006 2007 2008 2009 2010 2011 2012 Function: General Government 22 23 24 27 31 29 29 30 Community and Economic Development 6 6 5 5 5 5 5 6 Municipal Solid Waste Collection and Disposal 8 7 7 7 7 7 7 7 Kodiak Fisheries Research Center 2 2 2 2 2 2 2 2 Total 38 38 38 41 45 43 43 45 Source: Borough Finance Department The Kodiak Island Borough implemented GASB 34 in Fiscal Year 2006. That is why there is only 8 years of data. Full-time Equivalent Employees as of June 30 KODIAK ISLAND BOROUGH Full-Time Equivalent Borough Employees by Function/Program Last Eight Fiscal Years 138 KODIAK ISLAND BOROUGH Operating Indicators by Function Last Ten Fiscal Years 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Function General Government Elections Number of registered voters 10,101 9,671 9,282 9,300 9,417 9,587 9,599 9,649 9,619 9,479 Number voting in last election 2,181 2,599 2,181 2,200 2,407 2,105 2,477 2,477 2,311 2,139 Percent of registered voters 22%27%23%24%26%22%26%26%24%23% Public Safety Number of fire stations 2 2 2 2 2 2 2 2 2 2 Number of employees 1 1 1 1 1 1 1 1 1 1 Community and economic development Zoning compliance permits issued 145 156 187 150 212 214 203 245 149 113 Junk cars removed 145 188 125 100 58 261 83 89 218 27 Primary and secondary education Number of students 2,750 2,677 2,678 2,718 2,636 2,671 2,598 2,567 2,543 2,517 Number of General Fund certified staff 173 227 217 206 209 218 225 224 217 211 Number of General Fund classified staff 137 201 146 151 143 137 135 135 162 166 Solid waste disposal Total solid waste disposal in tons 16,821 17,303 17,253 16,290 16,997 14,730 14,429 14,580 14,896 16,558 Baled waste in tons 11,675 11,353 11,557 11,444 10,831 10,843 10,212 10,527 10,846 10,153 Scrap metal in tons 1,516 888 1,162 416 282 360 205 282 260 147 Asbestous, cubic yards 667 276 300 73 166 112 324 218 230 116 Source: Borough Finance Department 139 Function program 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 GOVERNMENTAL ACTIVITIES Number of buildings (teachery housing,schools and office buildings)19 19 19 20 19 18 18 18 18 19 Vehicles 8 8 8 8 9 10 13 13 15 15 Streets (miles)25.6 25.6 25.6 25.6 25.6 25.6 25.6 25.6 25.6 26.1 Land area - square miles 7,130 7,130 7,130 7,130 7,130 7,130 7,130 7,130 7,130 7,130 (provided by the City of Kodiak within the city limits and by the State of Alaska outside the city boundaries) 2 2 2 2 2 2 2 2 2 2 7 8 10 11 11 12 11 8 15 13 1 1 1 1 1 1 1 1 1 1 BUSINESS-TYPE ACTIVITES Number of Baler Facilities (Landfills)1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 223 223 223 223 223 223 223 223 223 223 1 1 1 1 1 1 1 1 1 1 16 15 15 15 15 15 15 15 15 15 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 A desription of the Kodiak Island Borough's Capitallization and Depreciation policy is included in the Notes To The Basic Financial Statements Kodiak Island Research Facilities (marine research) Dorm facility (6 apartments) Sources : Supplied by Kodiak Island Borough Department Heads Note: No capital asset indicators are available for the library function KODIAK ISLAND BOROUGH Capital Asset Statistics by Function/Program Last Ten Fiscal Years Parks (number of acres) Facilities: Hospital Culture, Parks and Recreation Roads Police: none Fire and Emergency Services Number of fire stations Number of Swimming Pools Number of playgrounds Number of Emergency response vehicles Emergency Tsunami Shelters Municipal Solid Waste Community Health & Public Services Mental Health Facilities